Home Loans for the Beginner

Buying a home is probably going to be the biggest expenditure in your lifetime. Even the thought of having to incur that expense is daunting. Luckily, we live in a country with only about 1,000 homeless people, compared to the millions throughout the rest of the world. Fortunately for us, we have home loans. Here’s what you need to know about them.

You have two major ways to get a loan, either through a bank or through HDB itself if you’re buying a HDB flat. Taking a mortgage loan from HDB requires a $5,000 initial payment and comes with an interest rate of about 2.6% per year. HDB also requires a 10% down payment which can be paid through your CPF.

In order to qualify for a HDB loan, one of the parties buying the flat must be a Singapore citizen. You cannot have already taken 2 or more loans from HDB. Your gross monthly income cannot exceed the stipulated amount, this being dependent on whether you are applying as a single, a family unit, or an extended family unit. The age of the property is another factor in determining whether you will qualify for a HDB loan or not. Make sure you read HDB’s website (www.hdb.gov.sg/cs/infoweb/residential/financing-a-flat-purchase/housing-loan-from-hdb) carefully; alternatively, go down in person and talk to a HDB officer to confirm your eligibility.

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Back in the day, HDB loans were the way to go but nowadays, banks are actually the cheaper option. Some rates start as low as 1.3% per annum for the first 5 years. If you take a bank loan however, you have to make a 25% down payment on your property, though up to 20% can come from your CPF and the remaining 5% has to be paid with cash.

Banks also usually stipulate a minimum loan of $10,000 and a maximum loan of 75% of the final purchase price of the property. Best of all, there are no restrictions on the nationality or citizenship of the applicant for a bank loan. As long as your credit is good, you’re good to go.

A final point: paying off your bank loan too early gets you penalised. They reason is obvious once you think about it: charging interest is how banks make money from loans. Why incur completely unnecessary penalties? Keep that extra dough for yourself!

With a little research and foot-work around banks and HDB offices, you can get ready to join the ranks of all the non-homeless people, and even better, homeowners, in Singapore!


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