Basic HDB Loan Structures

First time home seekers? Heavily vexed by the the types of housing loans to choose from or rushing to purchase a new home? Fret not, here are some basic information for you to curb your stress.

Potential owners can take up the loan from either HDB directly, or from FIs (Financial Instituitions e.g. Banks) who offer housing loan facilities. Each option has its own policies. For purchasers who are taking a loan directly from HDB, the salient points are as follows:

1) The purchase price can be fully paid by CPF funds, less the initial option deposit.

2) HDB's current concessionary interest rate (also known as subsidized rate) is at 2.6%. However, it is subject to HDB varying the rate from time to time. It is good to know that HDB does not vary their interest rates as rapidly as the FIs.

3) The downside however, is that each illegible person can only utilize this benefit 2 times in his or her lifetime, be it for a direct purchase from HDB or from the secondary market.

For purchasers who do not qualify for the HDB concessionary rate, or who opt for a loan from the FIs, they are subjected to the following:

1) Only up to 90% can be financed, so the difference between the purchase price of the property and the loan will have to come from private funds. This portion however, can be a combination of cash and CPF savings, e.g. first 5% has to be in cash, while the balance from CPF. It is a statutory requirement for all purchasers to furnish the initial 5% in cash.

2) FIs who grant loans have both Fixed Interest Rate and Variable Interest Rate packages. These loans are based on commercial interest rates depending on their cost of funds at that particular time. These rates may or may not be as competitive as compared to HDB's concessionary rates. Commercial rates may fluctuate frequently, therefore it is prudent for borrowers to keep abreast of the market movement and interest rates at all times.

**FIs have their own credit assessment guidelines which may not conform to that of HDB.