You’ve found an HDB property reseller, and you can’t wait to finance and move to your new flat. However, you discover that the government disallows anyone to purchase a property without an HDB Loan Eligibility (HLE) letter. Thankfully, it’s easy to get it in no time.
Unfortunately, due to certain professional and extracurricular activities, you’ve forgotten to walk the HDB ownership process. It’s been more than six months since you last remembered. You’ve submitted your HLE letter to the property reseller. Consequently, the owner says you’ll need to get a new HLE letter because it’s expired.
A letter from HLE validity goes from six months after provision. Once you’ve secured and used your HLE letter for a loan to successfully purchase a flat, you need to wait for 30 months after selling your previous property before you can do it once again. HLE letters are necessary for purchasing any HDB flat from the government or qualified resellers.
What is HDB Loan Eligibility?
HDB Loan Eligibility (HLE) is the Housing Development Board’s filtration method to find only the most suitable candidates who can purchase affordable, government-subsidized properties. These guidelines enable HDB to keep flat values consistent by barring high-income earners from inflating its values.
Alternatively, HDB cannot grant its flats to too-low income earners who have a high likelihood of becoming defaulting borrowers. By granting only an ideal buyer, they effectively limit purchases, control property construction speeds, and quell supply and demand for consistent property value.
HDB evaluates HLE letter receivers by looking through their income floor and ceiling. To date, families with a collective income not exceeding SGD $14,000 are ideal HDB property buyers. Alternatively, Singaporeans moving alone into an HDB flat must not exceed SGD $7,000 in monthly income. We’ll discuss requirements income and other details later in this post.
How to Apply for an HDB Loan Eligibility Letter
The Singapore government prides itself on easy-to-use, online-accessible portals. Singaporeans can use the HDB Loan Eligibility application portal to conveniently apply for a letter from anywhere with an internet connection. Additionally, you won’t need to submit your documents to local government offices. The portal allows you to upload your documents through a secure connection.
The portal will ask you to submit a number of documents supporting your application. Have your payslips, employment letter of offer, and other corporate documents ready. It’s possible for unemployed Singaporeans to for an HLE letter with their respective requirement set. However, the unemployed Singaporean applicant must apply for an HLE letter for an HDB concessionary loan during their employed years and not during unemployment.
Why Do You Need an HLE Letter?
With an HDB Loan Eligibility (HLE) letter, you can successfully use the in-house HDB concessionary loan service. Alternatively, you can use banks as an alternative HDB financing. Each one has its advantages and disadvantages, but banks will still require you to present a loan eligibility HLE Letter.
The major difference between HDB housing loan services and banks are interest rates. An HDB housing loan can give you a stable interest rate. However, the interest figure is often higher than banks. Yet, it remains the same throughout your loan payment period.
On the other hand, banks usually have lower initial interest rates to draw in HLE letter borrowers. However, their HDB loan interest rate anchors its values on the current Singapore Bank Offer Rate (SIBOR) and Swap Offer Rate (SOR). Truthfully, HDB relies on both figures for their financing’s interest rates, but banks have fluctuating interest rates yearly, which can be a boon or bane for borrowers.
Fortunately, if you follow the steps above and take note of the documents and other requirements needed for your current state of employment, you can secure your HDB housing loan in no time. Without an HLE letter, you cannot do the following:
Booking a New HDB Flat for Purchase
The HDB has strict guidelines on who can purchase their HDB private residential property local. Anyone who gets a rejected HLE letter application cannot secure an HDB concessionary housing loan and use cash to purchase their property. Truthfully, you cannot purchase an entire HDB property through cash — HDB places certain cash limitations (ranging from 5-10% cash-only deposits) to prevent high-income earners from securing many HDB properties.
Alternatively, an HLE letter allows you to use both HDB concessionary loan services and book a new HDB flat to your name. Your letter confirms your future HDB private residential property ownership without a down payment, which makes it crucial to apply for and receive your loan eligibility letter HLE.
HDB Resale Option (For Buyers)
Resellers won’t have to secure their respective HLE letter. However, they must inform their buyer to apply for and get their letter from HDB before they can finalize the purchase. HDB will then assess the reseller’s property and approve the latter’s proposed resale amount. The HDB is the only party that can grant the sale’s legalization. If a reseller approved a sale without informing the HDB, they could receive penalties and a permanent ban on HDB ownership.
The strict guidelines continue to follow the HDB’s filtration method of finding the most suitable HDB property ownership candidates. Additionally, monitoring every HDB property sale allows them to adjust the LTV limit, respectively, making them affordable for the average Singaporean worker who needs a home than hoarding real-state moguls.
HDB Property Transfer
Instead of selling, HDB property owners may want their blood relatives, children, or close friends to inherit their estate. Still, they’ll need an HDB Loan Eligibility letter to make this happen. Even if there’s no sale and profit involved, the HDB needs to monitor these activities to prevent property value inflation.
Unscrupulous real estate hunters can do is to use individuals eligible for property ownership. They’ll have the buyers use their money to make a purchase, then sell or transfer the property to them in the future. With the Loan Eligibility letter becoming mandatory, hunters cannot commit predatory purchases of public-subsidized housing properties. Doing this helps the HDB maintain their property’s LTV limit once again.
What’s The Maximum HDB Loan You Can Borrow?
The Housing Development Board’s housing loans refer to maximum borrowed amounts as Loan-To-Value limits (or LTV limit. In-house loans from the Development Board can give you up to 90%. Banks can only provide up to 75% LTV, making in-house loans from the Development Board the best choice for financing your new flat.
Keep in mind that the higher your target flat’s value is, the higher your interest payments and total LTV becomes. Additionally, you’ll need to make sure your Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR) are in good standing before you apply for a Development Board eligibility letter. More on this later.
HLE Letter Validity
As we’ve mentioned earlier, your letter of eligibility only has six months before it expires. Once it expires, you’ll need to apply for a new letter. In some cases, the Development Board may ask you certain questions, such as your reasons for delaying your loan application using the letter.
Truthfully, the Development Board cannot ban any Singaporean from applying for Loan Eligibility letters. However, repeated delays using the letter without any follow-through is a cause of suspicion that may give them cause to consecutively reject letters for application from repeat delayers.
Review of HLE Letter
The Housing Development Board can decide to review your letter any time during your loan application. The primary reason for this is to determine if your income and current civil status have remained unchanged. Often, a review of letters initiates once the Development Board discovers that you’ve added extended family members or a recent promotion increased your income.
Most letters get reviewed for the following reasons:
- The Development Board has a strong reason to question the provided borrower data
- Changes in core or extended family members
- You and family members encounter events making you ineligible for property ownership
- Rare Development Board policy changes affecting your applications directly.
How Long Do I Need to Wait To Receive My HLE Letter?
It takes a week or less for a letter applicant to receive their documents. Alternatively, they will receive a rejection notice if they did not pass the housing loan eligibility and requirements.
Eligibility and Requirements to Receive an HLE Letter of Offer
The HDB requires the following from would-be buyers:
- Never taken two or more HDB loans
- Have only used HDB loans once and never owned a private (non HDB) residential property locally or abroad
- Does not go over income ceilings respective of households
- SGD $14,000 for Singaporean core families
- SGD $21,000 for Singaporeans with extended families
- SGD $ 7,000 for single Singaporeans
- Never resold a private property in the last 30 months before the application date
- Never owned a stall or commercial, industrial property
The Development Board disregards the following as household income:
- Alimony or maintenance fees
- Bonuses
- Claims/reimbursement/expenses
- Director’s fees
- Dividend income or interest from deposit accounts
- Income from ad hoc overtime work
- National Service allowance
- Occupier’s income
- Overseas cost of living allowance
- Pension
- Rental income
- Scholarship overseas allowance
By Easily Following The Steps, You Can Get Your HLE Letter in No Time
Every Singaporean deserves a home. Thanks to the Housing Development Board’s subsidized government properties, affordable housing is accessible for all Singaporeans. Truthfully, it has some strict limitations to discourage property hoarders and maintain its property value. But, if you’re eligible, you’ll always have a beautiful flat to come home to in Singapore.
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