Looking to buy another HDB flat? You’re not alone. Some Singaporeans look for a new property when their HDB BTO flat hits the Minimum Occupation Period (MOP). Others choose to buy a home closer to their schools, workplace, or MRT/LRT stations. Another reason is to upgrade to a more spacious flat due to their growing family.
But what if you do not have enough CPF savings or cash to buy your next property while waiting for your old property to sell? This is when you can rely on HDB bridging loans.
Does HDB provide a bridging loan? HDB does not provide a bridging loan, but you can apply for a second HDB housing loan after you have disposed of your existing flat. You can take up a bridging loan from any bank so long as the Housing & Development Board (HDB) and/or your bank allow it.
HDB Housing Loan
What Is an HDB Housing Loan?
HDB concessionary loans are for Singaporeans who need financing to purchase an HDB flat. Currently, the interest rate for an HDB loan is 2.60%. Additionally, this type of loan can finance up to 85% of your flat’s valuation or price – whichever is higher. Lastly, the maximum loan tenure is either 25 years, or 65 years minus the borrower’s age.
This loan only applies to HDB flats and the loan amount will base on different factors, such as the flat buyer’s:
- Age
- Monthly income
- Job stability
- Current loans and existing financial commitments
- Past repayment records
- Monthly cash savings
How do you pay for the monthly repayments? You can pay via your CPF savings or pay for it in cash.
How To Apply
Eligibility
- At least one buyer must be Singapore Citizen
- The monthly household income ceiling must not exceed:
- Families: S$14,000
- Extended families: S$21,000
- Singles: S$7,000
- Buyers must not own any private residence – both in Singapore or overseas
- Buyers must not have taken more than two previous HDB loans
- Buyers have not disposed of private residential property within 30 months before applying for the HDB loan.
You can also complete this questionnaire so HDB can assess your eligibility for the purchase of a new or resale flat and an HDB housing loan.
Application for an HDB Housing Loan
Before applying for an HDB housing loan, you need to first apply for an HDB Loan Eligibility (HLE) letter. Click here to apply.
What if you want to sell your old HDB flat and buy a new one? Can you take a second HDB housing loan?
Yes, you can. Your second HDB housing loan amount will be reduced by the full CPF refund and part of the cash proceeds from the sale of your last-owned HDB flat.
How To Apply for a Second HDB Housing Loan
On top of meeting the eligibility conditions listed above, you also need to meet the following requirements:
- You have disposed of your existing flat and do not own any HDB flat
- You are buying an HDB flat before disposing of the existing one
- Note that you will be charged a commercial interest rate for the housing loan to buy the next flat
- The interest rate will be converted to the concessionary rate after disposing of the existing flat and using the CPF refund and up to 50% of the cash proceeds for the sale of your property.
Bridging Loan
What Is a Bridging Loan?
Say you’ve found the perfect HDB flat with enough space for your growing family and at a location you preferred. However, you don’t have enough CPF savings or cash for the down payment. On top of that, you’re still waiting on the sale proceeds of your old property.
This is when you can take up a bridging loan.
Bridging loans allows you to pay your HDB down payment as well as initial expenses before your existing property is sold. With this loan, you can successfully purchase the HDB flat you want without worrying about missing the chance.
Here are some of the basic features of a bridging loan in Singapore:
|
Maximum Amount |
The bridging loan amount is limited by the net proceeds and CPF balances from the approved sale of your old property. |
|
Maximum Tenure |
Mandatory to be settled within 6 months. |
|
Bridging Loan Interest Rates |
Varies depending on the bank, but generally ranges from 5% to 6% p.a. |
Note: Do not confuse HDB bridging loans with the Temporary Bridging Loan Programme(TBLP). The latter was introduced in response to the COVID-19 pandemic to help SMEs have access to working capital for their cash flow needs.
What Are the Types of Bridging Loans in Singapore?
- Capitalised Interest Bridging Loan: This loan covers the entire amount of the new property. Additionally, the repayments will start after your old property is sold. That said, you won’t be paying off two loans at the same time.
- Simultaneous Repayment Bridging Loan: This option involves simultaneously repaying your home loan along with the bridging loan. You typically have less than 12 months to complete the sale of your property and commence your loan repayment.
How To Apply
The eligibility criteria and requirements may vary depending on the bank or financial institution you’re borrowing from. But here are some of the basic requirements:
Eligibility
- Between 21 to 65 years old
- Singapore Citizens, Permanent Residents, and Foreigners
- Buying another flat from the HDB resale market or directly from the HDB
- All owners of the flat sold must be the borrower
Requirements
- Option to Purchase (OTP) document
- CPF withdrawal statements
- Outstanding bank loan statements
Top Bridging Loans in Singapore 2022
Which banks offer bridging loans? Top banks in Singapore that offer home loans can also provide bridging loan packages for you. Here are some of the top options:
| DBS Bridging Loan | Standard Chartered HDB Bridging Loan | UOB HDB Home Loan | |
|---|---|---|---|
|
Interest rate |
Prime rate |
3-Months Sibor + 2% annual interest |
4% to 5% |
|
Tenure |
Up to 6 months |
Up to 6 months |
Up to 6 months |
|
Property type |
All property types |
HDB |
HDB |
Typically, you’ll take up a bridging loan from the same bank that is providing you with your current home loan.
With all three banks having a 6-month maximum tenure, you can look at the interest rate and property type to help you differentiate the bridging loan packages.
As such, if you’re looking to purchase a condo or private property, you may want to consider the DBS Bridging Loan. It is available for all property types, plus they charge an interest rate of 4.35% p.a. (prime rate).
If you’re looking to purchase a new HDB flat, you can consider the Standard Chartered HDB Bridging Loan since it has a lower interest rate as compared to UOB. However, a 3-month SIBOR means your bridging loan rate is refreshed every three months. This means your monthly loan repayments will not be consistent.
Is there an alternative bridging loan option aside from banks?
If you don’t qualify for a traditional bridging loan from banks, you can consider taking up a loan from Singapore’s licensed money lenders. They can offer you up to six times your monthly salary for a bridging loan.
Additionally, all money lenders can only charge a maximum of 4% interest rate per month. This cap applies regardless of the borrower’s income and whether the loan is secured or unsecured.
How To Apply
Eligibility
- At least 21 years old
- Must exercise the Option to Purchase (OTP)
- Minimum Income:
- Singaporeans or Permanent Residents: S$2,000
- Foreigners: S$3,000
Requirements
- A copy of your NRIC
- Copy of the OTP
- Proof of income and employment
- Proof of residence
- SingPass to log in to CPF, IRAS, and HDB websites
Is it safe to borrow from a licensed money lender in Singapore?
In Singapore, all licensed money lenders abide by a set of comprehensive rules and regulations. They are monitored by the Ministry of Law and Registry of Moneylenders.
Considerations When Looking for a Bridging Loan
1. Loan Amount
Typically, banks offer bridging loans that finance up to 25% of your new property’s purchase price. A money lender, on the other hand, can finance up to 6x your monthly salary.
But keep in mind that bridging loans are short-term loans. This means you have up to six months to repay the amount you borrow with interest. As such, borrow only the amount you need to pay for the down payment to complete your property purchase.
2. Interest Rate
Bridging loans typically have a higher interest rate ranging from 5% to 6% p.a. If you’re facing financial difficulties, it’s best to choose a loan package with lower interest rates.
Depending on the bank, you can opt to pay off the interest first and pay off the bridging loan when you’ve received the sales proceeds on your old property.
3. Monthly Repayments
As previously mentioned, there are two types of bridging loans – capitalized interest or simultaneous repayment methods. This can affect your monthly repayments.
Can you afford to pay off your bridging loan and your mortgage loan simultaneously? Or do you prefer to repay the loan after you’ve collected the sales proceeds of your old property?
4. Loan Tenure
Typically, you only have up to 6 months to repay the loan. Take your time comparing interest rates since a short tenure can lead to higher monthly loan repayments. Additionally, make sure to stay on top of your monthly loan repayments to avoid accruing late payment fees.
5. Risk Level
Bridging loans are perfect when you need a large sum to pay off your home down payment and close your property transaction. But just like any type of loan, it comes with a few risks:
- It uses your property as collateral
- It is a short-term loan which means higher monthly repayments
- You’re taking on a loan before your old property is sold
- If the real estate market devalues your old property, you will need to use your savings or income to make up for the loss in net sales proceeds.
Take these risks into account before you decide to take up a bridging loan.
Closing
Buying a new property and selling your old one can feel like a wonderful fresh start. Unfortunately, you may have to face financial challenges such as not having enough savings to cover the new HDB down payment. For such cases, you can take up a bridging loan.
Key takeaways
- A bridging loan allows you to pay your HDB down payment as well as initial expenses before your existing property is sold.
- This loan is a good option if your funds are tied to your existing property and need help financing your next property purchase.
- Interest rates for bridging loans vary depending on the bank but typically range from 5% to 6% per annum.
- HDB does not provide a bridging loan, but you can apply for a second HDB housing loan after you have disposed of your existing flat.
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