Buy a property within your means. Take stock of all your resources to see what you can afford and how much you can borrow, and get to know the differences between HDB loans and bank loans. Show Key takeaways
Buying a home is a huge milestone and a long-term financial commitment. So make sure you buy a home that you can afford in the long run. You'll need to have enough resources to pay for upfront costs, ongoing homeownership expenses and monthly loan instalments. Upfront costsThese include the option fee, downpayment, stamp duty, legal cost, agent's commission and fees, renovation and other miscellaneous costs. Ongoing expensesThere are some ongoing expenses which cannot be paid with your CPF savings. You'll need to set aside enough money for:
You may have to dip into your savings if you're not prepared. Monthly loan instalmentsA home loan is usually repaid in monthly instalments. Each monthly instalment consists of a principal repayment and interest payment. The size of your monthly instalment depends on how much you have borrowed, the loan tenure, the interest rate of the loan and how interest is computed. Things to note:
How much do you have now?Take a look at what you currently have. Do you have enough money to see you through all the costs involved in buying a home? Your available resources could come from your:
How much can you borrow?HDB and the lenders will assess how much you can borrow for a home loan in the following ways: Mortgage servicing ratio (MSR) MSR indicates the proportion of your gross monthly income that is used to service your mortgage. MSR = Monthly mortgage repayment / Gross monthly income Your monthly HDB or Executive Condominium (EC) loan instalment must not exceed 30% of your gross monthly income. This applies if you are buying an HDB flat, or EC where the minimum occupation period of the EC has not expired. Total debt servicing ratio (TDSR) TDSR indicates the proportion of your gross monthly income used to service all your monthly debt repayments. If you are taking a loan to buy a property or a loan secured by a property, you will need to meet the TDSR rules. TDSR = Total monthly debt payments / Gross monthly income Your total monthly debt commitments (e.g. mortgage payments, car payments and credit card payments) should not exceed the TDSR threshold of 55%. You may find out more about how the TDSR is computed here. Loan-to-value limits The loan-to-value (LTV) limit determines the maximum amount you can borrow for a housing loan. LTV = Loan amount / Property value Lenders will consider the following before granting the LTV:
The LTV limits for individuals change depending on the number of outstanding housing loans a borrower has. For bank loans on residential properties, the following LTV limits apply:
Apply the lower LTV limit if the loan tenure exceeds 30 years (or 25 years for HDB flats), or the loan period extends beyond the borrower’s age of 65 years. Getting an HDB loanIf you are buying an HDB flat, you may qualify for a loan from the HDB. With an HDB loan, you may borrow up to 85% of the purchase price or the property’s valuation price. This depends on which is lower, subject to HDB’s credit assessment. The amount of HDB loan granted depends on:
Are you eligible?To find out if you are eligible for an HDB loan and the maximum amount you can borrow, you will need to apply for an HDB Loan Eligibility (HLE) letter. The HLE helps you plan for your home purchase by giving you information on how much you can borrow, the monthly repayments, the amount of cash you need and other terms and conditions. Note: An HDB loan comes with certain eligibility criteria such as an income ceiling. Check if you qualify. HDB loan versus bank loanIf you're choosing between an HDB loan and bank loan for financing your HDB flat, the key differences to consider include the downpayment, interest rate and flexibility to pay off your loan early. Compare the two loan types below:
Find out more: About Housing Loans: Key Questions to Ask Your Bank Before Taking a Housing Loan Do your sumsTry working out what you can afford using the Mortgage Calculator. |