By : Nur Raihana
07 November 2017
If you are flat-hunting, you should know the drill by now—buy a home that you can happily afford! The HDB InfoWEB is a treasure trove of information on how to finance your BTO flat, but here, we have answered some common questions from first-time home buyers.
I am looking to buy a BTO flat — where do I even start?
Step 1: Head to this e-Service to get approximate figures on how much HDB loan you can get
Step 2: Check how much grants you are eligible for, based on your average monthly household income
Step 3: Find out how much CPF Ordinary Account savings you and your partner have
Step 4: Note how much cash savings you have in the bank
Add up all the amounts from Step 1 to 4 and ta-dah! — your approximate flat budget. This first step should give you an idea of the flat type you should shortlist, and in which location.
We are in love, but we are both still studying. Should we apply for a flat now so we get maximum grants as first-time flat buyers?
You should wait till one of you is employed at the time of flat application, and have worked for at least 12 consecutive months before that. Only then will you be eligible for the SHG and/ or AHG, assuming that other eligibility criteria have been met.
Do I need to have savings amounting to the total cost of the BTO flat, on hand?
No, you do not. Payment for your flat is spread out over a period of time.
If you do not have sufficient cash or CPF savings to pay for your flat in full*, you can take a housing loan to pay for your home. The maximum HDB loan tenure is 25 years and you will make monthly payments till the housing loan is fully redeemed.
This e-Service can generate a detailed financial plan for you.
Should I take an HDB loan or a bank loan?
There are pros and cons of each and you should do your research before deciding on one.
For example, banks may currently offer lower interest rates than the HDB housing loan (at 2.6%). However, an HDB loan lets you borrow more (90%, versus 80% for a bank loan). With an HDB loan, you can pay the 10% downpayment using CPF funds but with a bank loan, the 20% downpayment must include at least 5% cash.
Can I opt for a shorter loan tenure so I accumulate less interest?
25 years is the default tenure for HDB housing loans, but you can make a partial capital repayment (PCR) which will reduce the total amount of interest paid. With PCR, you can then decide whether to shorten the repayment period while paying the usual monthly instalment amount, or maintain the repayment period and pay less per month.
What happens if I have trouble paying off my HDB loan in future?
HDB has measures in place to help families who require financial assistance. That said, sound financial planning is crucial to avoid such situations.
Do you have other questions about financing your flat? Write to us at email@example.com and we will try to help!