Whether you’re buying a property in Singapore for your own stay or for investment, having a comprehensive understanding of housing loans is crucial. Knowing about Singapore’s housing loans can help you reduce your property expenses and ultimately achieve a better return on investment.
First, let’s clarify a fundamental question: What is a housing loan?
A housing loan refers to any form of financial support provided by banks and other financial institutions to homebuyers, typically with the purchased property serving as collateral. We also commonly refer to it as a “mortgage”.
Obtaining a housing loan means:
- Your property will become the collateral for the loan.
- Banks and other financial institutions have the right to determine your loan eligibility and the loan amount.
- After the down payment is made, the housing loan will be repaid in installments.
- The installment amount includes both the principal and interest of the loan.
Here are 8 key factors you need to know when applying for a housing loan in Singapore:
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- The main differences between bank housing loans and government (HDB) loans
- Eligibility for a housing loan
- Using CPF for a housing loan
- Income requirements
- Loan-to-Value Ratio (LTV)
- Age, loan quantum, and loan tenure
- Processing fees for a housing loan
- Application and approval process
Table of Contents
I. Key Differences Between Bank Housing Loans and HDB Housing Loans:
You can apply for a bank housing loan in Singapore for all of the following property types:
- HDB flats
- Private properties
- Executive Condominiums (EC)
Homebuyers can only get a bank loan to purchase private properties and ECs, as the Housing & Development Board (HDB) does not offer loans for these two property types.
Furthermore, even when purchasing an HDB flat, some buyers may not be eligible for an HDB loan (see Section II, Eligibility for a Housing Loan below). Therefore, these buyers must apply for a bank loan.
There are two main differences between HDB loans and bank loans:
- Different maximum loan amounts
- An HDB loan can cover up to 80% of the property price or value, whichever is lower. The minimum down payment is 20%.
- A bank loan can cover up to 75% of the property price or value, whichever is lower. The minimum down payment is 25%.
Therefore, a bank loan requires a larger initial cash outlay.
Please note: These are the maximum loan amounts—in some cases, the amount you can borrow may be less (see Section V, Loan-to-Value Ratio, LTV).
- Different interest rates
- The HDB loan interest rate is set at “the prevailing CPF interest rate + 0.1%”. Currently, it is 2.6%. The HDB rate rarely changes and has remained constant for nearly 20 years. Therefore, many people consider it equivalent to a fixed rate. Of course, if the CPF interest rate is revised, the HDB rate will change accordingly.
- Bank housing loan interest rates are more complex, divided into fixed rates and floating rates. It’s important to note that there are no perpetual fixed-rate housing loans in Singapore—all rates will fluctuate over time. Even if you get a “fixed-rate” housing loan, the rate is usually fixed only for a certain period—such as three to five years—before reverting to a floating rate.
II. Eligibility for a Housing Loan
Whether you apply for a housing loan from a bank or the HDB, you will need to prove a valid source of income—usually your payslips or CPF contributions for the past six months. If you are self-employed or have a variable income, you can provide your Notice of Assessment (NOA) from IRAS.
To qualify for an HDB loan, the following conditions must also be met:
- At least one co-borrower must be a Singapore Citizen. An applicant can only take out an HDB loan twice in their lifetime; if you have already taken two, you can only use a bank loan thereafter.
- The combined monthly household income of the applicants cannot exceed S$14,000, and for singles buying a flat, the monthly income cannot exceed S$7,000.
- The buyer must not own any other property. If you have just sold a private property, you must wait 30 months before you can apply for an HDB loan.
- The buyer must not own more than one commercial property. If the buyer owns one commercial property, it must be owner-occupied (e.g., not rented out to others). This owner-occupied commercial property must be the sole source of income.
- The remaining lease of the property must be able to last until the youngest buyer reaches the age of 95.
- The buyer must also meet the requirements described in Section IV, Income Requirements.
Eligibility for bank loans varies more widely, as each bank may have its own policies and regulations. However, all banks, as well as the HDB, will conduct a credit check on the borrower. Generally, the credit score must not be lower than BB—a good credit score can secure a higher loan amount and favorable interest rates.
If an applicant has a previous bankruptcy record, they usually need to wait five to seven years after receiving the official letter of discharge from bankruptcy before they can apply for a housing loan.
Foreign property buyers should also note that Singapore banks must comply with Know Your Customer (KYC) procedures and other compliance issues; buyers may be required to submit additional documents and proof.
All banks will require all applicants to meet the income requirements, age restrictions, and Loan-to-Value (LTV) ratios described below.
III. Using CPF to Apply for a Housing Loan
The CPF Ordinary Account (CPF OA) can be used to pay for the down payment of a house.
For an HDB loan, you can use CPF to pay up to 10% of the property price.
For a bank loan, the buyer must pay 5% of the property price in cash, and then the next 20% can be paid using CPF.
You can use your CPF to make monthly repayments for both HDB loans and bank loans.
Buyer’s Stamp Duty (BSD) or Additional Buyer’s Stamp Duty (ABSD) can also be paid from your CPF.
Please note: You cannot use CPF to purchase a leasehold property (whether HDB or private) with a remaining lease of 20 years or less.
When you sell a property, the sale proceeds must first be used to repay the CPF funds used (including accrued interest). If you want to avoid this, you can consider paying for certain items, such as monthly installments or the down payment, in cash.
Using CPF to buy a second or subsequent property: Applicants can still use their CPF funds to buy a second or subsequent property. However, they must set aside the Basic Retirement Sum (BRS); any amount above the BRS can be used to purchase property (you need to check with CPF how much BRS you need to set aside for your age).
CPF also has a Withdrawal Limit (WL), and any amount beyond this limit must be used to repay the loan in cash.
The WL applies to all property types except for BTO flats.
The WL for the first property is 120% of the property’s Valuation Limit (VL). The WL for subsequent properties is 100% of the VL.
The VL refers to the value or price of the property at the time of purchase, whichever is lower.
For example: If the lower of your property’s price or value is S$350,000 (the VL), you can use up to S$420,000 from your CPF account. If this limit is reached and the housing loan is not fully repaid, you will have to pay the remaining balance in cash.
IV. Income Requirements
Many loans in Singapore (not just housing loans) have income requirements for the lender. The minimum income requirement for a single borrower is S$24,000 per year, and if there is a co-borrower, the minimum annual income requirement is S$36,000. For expatriates in particular, some banks even require the borrower’s income to be double the loan amount.
There are two other important considerations: the Mortgage Servicing Ratio (MSR) and the Total Debt Servicing Ratio (TDSR).
Mortgage Servicing Ratio (MSR)
When you purchase an HDB property, the MSR applies. Your monthly mortgage payment cannot exceed 30% of your total monthly income. (Total monthly income does not include the employer’s CPF contributions).
For example: If you and your co-borrower have a total monthly income of S$5,000, your MSR limit is S$1,500.
If your monthly payment exceeds this amount, you will have to extend the loan tenure (see Age and Loan Tenure below) or make a larger down payment.
Total Debt Servicing Ratio (TDSR)
The Total Debt Servicing Ratio (TDSR) applies to all bank housing loans. The total monthly repayments for all your debts (including car loans, personal loans, etc.) are capped at 55% of your monthly income.
For example: Suppose you and your co-borrower earn S$10,000 per month. You have outstanding loans that require S$2,000 in monthly payments. Your TDSR limit is ((60% of S$10,000) – S$2,000) = S$4,000.
Since the TDSR considers all liabilities, it is advisable to start paying off other loans before applying for a housing loan to get a higher quantum. Even if you cannot pay them off completely, start consolidating or reducing these loans in the 12 months before applying for your housing loan.
This will also help improve your credit score and maximize your chances of getting the full LTV. Besides salary and debt, there are other factors to be aware of regarding how TDSR might affect your housing loan application.
If you purchase an HDB property with a bank loan, you must meet both the MSR and TDSR. The same applies to ECs that have not yet reached their Minimum Occupation Period (MOP).
V. Loan-to-Value Ratio (LTV)
The Loan-to-Value ratio refers to the maximum amount a homebuyer can borrow.
HDB Loan LTV: Capped at 80% of the purchase price/property value
Bank Loan LTV: Capped at 75% of the purchase price/property value
To put it in more familiar terms: for an HDB loan, you need to prepare a 20% down payment; for a bank loan, you need a 25% down payment (of which 5% must be paid in cash).
It’s possible you may not be able to borrow the maximum amount. Factors that can affect your LTV include the property’s condition and the borrower’s circumstances. In other words, the property’s remaining lease, location, and condition, as well as your age and credit score, will all affect how much you can borrow.
- If a property has a remaining lease of 30 to 40 years, your LTV might be limited to 60%. This is because, in the eyes of the bank, a shorter remaining lease means lower market value, making the collateral less premium. The same logic applies to the property’s location and condition.
- If your housing loan extends beyond your 65th birthday, your LTV will be restricted. Additionally, a loan tenure exceeding 30 years will also lower the LTV. If you apply for a mortgage at age 35, you must repay it in full before you turn 65 to enjoy a higher LTV.
VI. Age, Loan Quantum, and Loan Tenure
The minimum age to obtain a housing loan is 21 (the age requirement for purchasing an HDB flat still applies), and the maximum age is 65.
The maximum loan tenure for an HDB flat is 25 years, and for a private property, it is 30 years. As mentioned above, to get the full LTV, the loan tenure for an HDB flat cannot exceed 25 years, and for a private property, it cannot exceed 30 years.
As mentioned in the Loan-to-Value section above, your age and loan tenure will collectively affect your loan quantum. For example, if you are 50 years old and apply for a 20-year housing loan, you will be past the retirement age of 65 when you finish paying it off; the LTV you can obtain will be reduced to 55%.
VII. Associated Costs of a Housing Loan
When buying a property, please note that in addition to the purchase price, we also need to prepare for the costs associated with applying for a housing loan. Below is a list of the different types of fees you may need to pay during the process of obtaining a housing loan:
- Legal Fees for Property Transfer
Anyone applying for a housing loan will need to hire a lawyer to provide legal services related to property transfer, mortgage documents, Inland Revenue Authority of Singapore (IRAS) stamp duty, CPF fees, and mortgage stamp duty.
Legal services are involved in all property sales and purchases, refinancing, decoupling/part-purchase, and medium- to long-term loans and equity loans. Different law firms and services have different prices, ranging from approximately S$1,500 to S$3,000.
- Property Valuation Fees
When issuing a housing loan to a borrower, all Singaporean banks require a property valuation report. The usual steps include an indicative valuation during your housing loan application and a formal valuation after your loan is approved.
The valuation fee depends on the type of property, its market value, and the bank you are getting the housing loan from. Generally, valuation fees range from S$50 to S$700 and are a one-time charge only at the time of property purchase.
- Lock-in Period, Early Repayment Penalty, and Clawback Clause
Most housing loans have a lock-in period. If you want to pay off your housing loan early, the typical early repayment penalty is 1.5% of the repaid amount.
Some loan packages will waive the early repayment penalty upon sale of the property, or allow you to pay off a portion of the amount (but not the full loan) without a penalty.
A clawback clause usually applies to any subsidies or rebates provided by the bank when processing the housing loan.
When accepting a loan contract from any bank, be sure to pay close attention to the lock-in period and penalty clauses to avoid future regrets.
VIII. Housing Loan Application and Approval Process
The first step in the application process is to list the banks with the best interest rates. This information changes regularly, so contact a mortgage broker to help you determine the cheapest loan packages currently available.
The next step is to obtain an In-Principle Approval (IPA) from your chosen bank, which will help you budget for your upcoming property purchase.
You will need the following documents to apply for a housing loan:
- Identity Card (or passport for foreigners)
- CPF contribution history for the past 12 months (obtainable online from the CPF website)
- Payslips for the past three months
- IRAS Notice of Assessment (NOA) for the most recent year
- Credit card statements, and statements detailing other loans and repayments (e.g., car loans and education loans).
The documents you provide and your credit score will be used to determine the amount the bank is willing to lend you. If there are no issues, the mortgage application will take about two to three days to be approved. There may be delays if the bank has further questions.
Once your housing loan application is approved, the bank will provide you with the following information:
- The Residential Loan Property Fact Sheet
- The Letter of Offer (LOA)
- A document outlining the terms and conditions of the loan package
- A list of subsidies provided to you and a breakdown of fees
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