HDB concessionary loan: Know your eligibility and how to apply for HLE

If you're looking to buy an HDB flat, and your monthly salary does not exactly make you a millionaire, you will sooner or later have to get a home loan.

Other than taking a loan from the bank, you can apply for the HDB concessionary loan (or an HDB loan, in short).

This article will tell you what you need to know about taking an HDB concessionary loan.

Your eligibility for an HDB concessionary loan

The key thing to note is that the HDB loan has an income ceiling of $14,000 ($21,000 for extended families).

If the average gross monthly household income for both applicants (e.g. you and your partner) exceeds this amount, you'll have to take a bank loan instead.

The interest rate for the HDB loan is 0.1 per cent above the CPF Ordinary Account interest rate. With the current CPF OA interest rate at 2.5 per cent, the interest rate for the HDB loan is now at 2.6 per cent.

To gauge how much in HDB loans you can obtain, you can check your HDB loan estimate using this HDB loan calculator.

Do note that for HDB flats and ECs, regardless of the type of home loan you're taking, you'll be subjected to the Mortgage Servicing Ratio (MSR). It caps your monthly mortgage instalments at 30 per cent of your monthly income.

For example, if you and your spouse earn a combined $10,000, the maximum monthly repayment for your HDB flat is $3,000.

To sum up, here are the eligibility criteria to be eligible for the HDB concessionary loan:

• At least one buyer is a Singapore citizen
• Have not taken two or more HDB loans
• Gross monthly household income doesn't exceed $14,000 ($21,000 for extended families)
• You do not own, or have disposed of any private residential property in the 30 months before applying for the HDB Loan Eligibility (HLE) letter
• You do not own more than one market / hawker stall or commercial / industrial property*

*If you do operate a market / hawker stall or commercial / industrial property you have to work in it yourself.

A more detailed version of the list above can be found here.

If you want to be sure, you can also fill out this questionnaire to see whether you are eligible for an HDB housing loan.

Next step: Apply for the HDB Loan Eligibility (HLE) letter

The next question you may have is probably "So… how much loan can I get?"

One way to find out is by applying for an HDB Home Loan Eligibility (HLE) letter, which specifies the maximum loan amount from HDB you can stand to receive.

The HLE letter should be obtained before your first appointment to book a flat (for BTO buyers) or before the seller grants you the option to purchase (for resale flat buyers).

The maximum amount that HDB will be granting you depends on three main factors:

• Age
• Income
• Financial standing

It's logical to see how your age and income both influence your maximum loan amount. HDB would extend a higher loan amount to the younger applicant simply because he/she has more years to pay off the loan before his/her retirement age, which is the cut-off age for any HDB loan.

The repayment period is capped at either of the following, whichever is shorter: 

• 25 years
• Up till the buyer is 65 years old
• The remaining lease of the flat during application minus 20 years

Do note that HDB does not consider these for the credit assessment:

• Rental income
• Dividend income / interest from deposit accounts
• Alimony / maintenance fee
• Bonuses
• Director's fee
• Income from ad hoc overtime work
• National Service allowance
• Claims / reimbursement / expenses
• Scholarship overseas allowance
• Occupier's income
• Overseas cost of living allowance
• Pension

Here's how HDB takes income into consideration before specifying a maximum loan amount on your HLE letter. For a regular employee, the two most important documents you are required to show HDB are your latest three months' payslips and the last 15 months' of CPF contributions history.

For self-employed, part-time and odd job workers, documents such as your Notice of Assessment from IRAS needs to be furnished to HDB.

Required documents for HLE letter

HDB requires different sets of documents for different people. In a nutshell, the less stable your income, the more proof is required to be submitted to HDB.

For employees with monthly CPF contribution

• Latest three months' payslips
• Latest 15 month' CPF contribution history

For employees without monthly CPF contribution

• Latest six months' payslips
• Latest six months' bank statements
• Credit Bureau report

For self-employed persons

• Latest Notice of Assessment from IRAS or Certified Annual Statement of Accounts from an audit firm
• Credit Bureau report
• Latest six months' bank statements

For commission-based and part-time workers

• Latest six months' commission statements / payslips or a recent letter from the employer certifying job designation, commencement date, and commissions / salaries for six months before the month of application
• Latest 15 months' CPF contribution history
• Credit Bureau report
• Latest six months' bank statements

For odd job workers

• Latest Notice of Assessment from the IRAS or a recent letter from the employer certifying your job designation, commencement date, and your commission/salaries for six months before the month of application
• Latest 15 months' CPF contribution history
• Credit Bureau report
• Latest six months' bank statements

For unemployed persons

If you're a full-time student aged 18 to 62, you'll need to submit a valid Student Pass.

On top of that, if you've been unemployed for less than three months, you'll need to submit the following documents:

• Income proof for the preceding month(s) from the previous employer stating your gross monthly income and last day of service
• Latest 15 months' CPF contribution history

HDB will take around 14 days to process your HLE application after they receive all the documents. In the event that you do not get the amount you're hoping for, you can reverse engineer the process to get a higher amount when you reapply for the HLE letter.

To do so, start by looking at what factored into HDB's decision and improve on these factors. If you are a commission-based worker, for instance, you can try to take on more work to get a higher average monthly pay for six consecutive months and apply again.

If you have a huge outstanding debt (eg. a car loan), you might want to repay that first to increase your credit standing.

Again, to give you an idea of the maximum loan amount you'd get before you start your home search, HDB has a useful calculator to estimate how much loan your HLE letter will grant you.

Note: If you are buying a Build-To-Order (BTO) flat from HDB, then your financial position will be reviewed twice; once before you decide to purchase the flat, and another time nearer to the completion date of the flat.

Make sure your financial ability to service the housing loan has not changed by this point. While quite rare, it is possible that after you have gone through the BTO process, and put down your down payment, you are unable to get an HDB loan.

To avoid this disappointment so close to the finish line, we advise you to remain fiscally prudent and prioritise financial stability.

The Credit Bureau report

As noted above, certain buyers will need to get a credit report to apply for the HDB concessionary loan.

Credit Bureau Singapore (CBS) pools all your credit payment history from different banks and companies to give you a credit score. The higher your credit score, the easier it is to get a loan and the higher the loan amount you can get.

Before applying for the HLE letter, you can request for your credit score on the CBS website.

If you do not have an AA score (the highest), take some steps to improve it first, such as by paying off outstanding debts first, before you apply for the HLE letter.

The process of applying for an HDB concessionary loan

Apply for the HDB Home Loan Eligibility letter (HLE letter) and upload your documents through this website.

You can also save the application draft for 30 days, and retrieve it here to complete your application.

Afterwards, you can track your application on the MyHDB portal. Typically, HDB will process it within 14 days.

Good luck with your HDB housing loan application!

ALSO READ: Bishan resale flat sold for $1.36M, making it the most expensive HDB flat (for now)

This article was first published in 99.co.