When purchasing an HDB flat, you can choose to take a loan directly from HDB or a bank of your choice. But remember, in addition to the total loan amount, you still have to pay for the initial HDB downpayment.
First-time homeowners usually go for an HDB loan as it requires no cash downpayment. If you have enough savings, you can opt for a bank loan to enjoy a lower interest rate. If you don’t have enough savings as of now, it is likely that you will need to find a different, lower-priced property.
We will start with what an HDB downpayment means. This article will also talk about how much you need to save to pay off the downpayment of your chosen HDB type and when should you make the downpayment when purchasing a new home.
As the phrase suggests, the HDB downpayment is the initial sum of money you need to pay when you purchase a new HDB flat. It is the outstanding amount after deducting the LTV limit, for which you can also use your CPF OA savings to pay partly or fully.
You have to pay with the downpayment immediately after signing the Agreement for Lease to your home, irrespective of whether you are purchasing an HDB BTO flat or a resale flat.
While HDB resale flats tend to be bigger and more convenient, they are also more expensive than BTO flats of the same size and in the same area. This means you have to cough up a higher downpayment too. HDB BTO flats are significantly cheaper than resale flats as they aren’t sold by owners looking for capital gains.
Clearly, the downpayment of your HDB property is often the most important thing a buyer should consider when deciding on which property to buy. Fortunately, the HDB’s Staggered Downpayment Scheme comes as a saving grace for homebuyers. We will talk more about it in detail in a section below.
Before that, you must decide whether you should buy a BTO or an HDB resale flat in Singapore based on your financial situation and needs.
Both BTO and resale HDBs have their pros and cons. Here is a comparison table to help you choose what suits your requirements.
|BTO HDB Flat||Resale HDB Flat|
|More affordable option; highly subsidised||Price||More expensive option than BTOs|
|Relatively smaller||Flat Size||Bigger & more convenient|
|Pre-determined by HDB; fewer options||Location||Wider selection of locations|
|Longer wait time – 3 to 5 years||Waiting period||Shorter wait time – in a matter of months|
|Max household income limitations for singles, couples & extended families||Income ceiling||No income ceiling limit|
|One of the applicants must be Singaporean||Eligibility criteria||PRs are allowed to buy HDB resale flats|
|Generally less; can opt into HDB’s OCS to reduce costs||Renovations cost||Relatively high; up to 40% more than BTO flat|
|Fresh 99-year lease||Lease tenure||Declining lease|
|Up to $80,000 for first-timer families||Housing grants||Up to $160,000 for first-timer families|
|Better resale value after Minimum Occupancy Period||Future market value||Less profitable due to more competition|
Your HDB downpayment will possibly differ depending on two main factors:
Here is a table to show how much downpayment will you pay for your HDB flat:
|HDB loan||Bank loan|
|HDB BTO||15% CPF or cash||5% cash + 20% CPF|
|HDB resale||15% CPF or cash||5% cash + 20% CPF|
|Executive Condo (EC)||Not applicable||5% cash + 20% CPF|
Please note that we will only elaborate on the downpayment details of the HDB BTO flat vs HDB Resale flat. Note that you must secure an HDB Loan Eligibility (HLE) letter before applying for an HDB BTO or HDB resale loan.
A HLE letter declares how much HDB is willing to loan you, the repayment period and monthly instalments. You will have to sign the lease agreement and later pay the initial downpayment along with the legal fees and stamp duties.
Depending on the loan type you take, your downpayment may largely vary.
On 16 December 2021, the Singapore government introduced new property cooling measures, according to which the maximum LTV (loan-to-value) has been revised to 85% (from the previous 90%) for all flat applications.
This means homebuyers taking out an HDB loan will have to pay a downpayment of 15% (instead of the previous 10%) of the purchase price. It can be paid in cash, using CPF OA balance, or any combination of the two.
For example, suppose you have decided to buy a 3-room BTO flat in a mature estate for $400,000. Since the LTV limit of an HDB flat is 85% (=$340,000), the HDB downpayment that you will need to pay is $60,000. You can pay this amount in cash, using your CPF OA balance, or a combination of both.
If a bank is financing your home loan, you can borrow a loan depending on the loan ceiling of your bank loan, which falls between 55% and 75% of the BTO flat’s purchase price.
If you took a 75% loan from a bank, the downpayment is going to be 25%. As discussed in the example above, for an HDB BTO flat worth $400,000, the downpayment will be $100,000.
Out of $100,000, 5% must be paid in cash (=$5,000), with the remaining 20% to be paid in cash or using your CPF OA savings or a mix of both.
Let’s say you have taken a bank loan with a loan ceiling of 55%. For the downpayment of 45%, you will need to pay 10% in cash, with the other 35% to be paid using your CPF OA savings, cash, or a combination of the two.
This means you will pay $40,000 (10% of $400,000) in cash for the downpayment, while the remaining $140,000 can be paid using cash or your CPF OA savings.
If you take up an HDB housing loan, you will need to shell out the downpayment for BTO during the signing of the lease agreement, which usually happens four months after you have booked the flat.
Please note that HDB offers a Staggered Downpayment Scheme if you are purchasing a BTO flat. If eligible, you can opt to pay the downpayment in two tranches. This will be discussed in detail in a section below.
On the other hand, if you choose to finance your BTO with a bank loan, you must check with your lender bank on the payment schedule.
One advantage of buying a resale flat is that since you are taking over the previous owner’s property, you don’t have to wait to collect your keys once the transaction is completed and can move in sooner. However, you might have to deal with the cost of renovating the flat, and it may have fewer years left on the lease when you buy it.
The details of buying a resale flat with an HDB housing loan are similar to those of buying a BTO flat.
If you are taking a housing loan from HDB, the downpayment you need to pay remains at 15% of the resale flat’s purchase price. It can be paid in cash, using CPF OA balance, or any combination of the two.
Suppose you are buying a 4-room resale flat in a mature estate at around $600,000. With 85% LTV limit (= $510,000), you are obligated to cough up 15% ($90,000) as the initial downpayment. You can pay all of this downpayment through your CPF OA.
When opting for a bank loan, the downpayment will be subject to the loan ceiling of your bank loan. You will need to put in a downpayment between 25% and 45% of the resale flat’s purchase price. Fortunately, you can pay most of it with your CPF OA balance.
Take a look at the details below:
When you are allowed an LTV limit of 75%, your property downpayment will be 25%. Out of the 25%, a minimum of 5% must be paid in cash while the remaining 20% can be paid out in cash, using CPF OA or a combination of both.
For example, as discussed above, the downpayment for a $600,000 4-room resale flat will be $150,000 (25% of $600,000).
At least $30,000 (5% of $600,000) needs to be paid in cash while the outstanding $120,000 (20% of $600,000) can be paid out through your CPF OA savings or whatever combination of cash and CPF monies suits you.
If the maximum loan you can borrow is 55% of the purchase price, your initial downpayment will be 45%. Out of which, you will have to pay 10% in cash, with the remaining 35% to be paid using your CPF savings, cash or a mix of both.
Therefore, for the 4-room resale flat worth $600,000, you will pay $60,000 (10% of $600,000) in cash, with the remaining $210,000 (35%) to be paid with cash or CPF OA savings.
Unlike unfinished BTO flats, you will not be eligible for the staggered downpayment scheme when buying an HDB resale flat. This means that you would have to fork out the cash or your CPF funds when signing the lease agreement.
If you take an HDB loan, you can pay the downpayment using CPF. Upon confirmation of your financial plan through the HDB Resale Portal, an online transfer of your CPF funds will be initiated.
If you want to pay through cash, you simply need to submit the cashier’s order at the resale completion appointment.
When taking a bank loan, you should check with your bank on the payment schedule.
For this reason, your HDB downpayment will differ considerably based on whether you select an HDB or bank loan. Therefore, it is crucial to make an informed decision between an HDB concessionary loan or a bank loan for HDB flats.
|HDB loan||Bank loan|
|15% (cash and/or CPF)||Downpayment||25% (min. 5% cash; 20% cash and/or CPF)|
|2.6% p.a.||Interest rate||1.6% to 2.5% p.a.|
|Little to no fluctuation||Interest rate fluctuation||Yes, after every few years|
|Higher||Monthly instalments||Generally low (as interest rates are low)|
|Practically none||Effort required||Needs to be refinanced every 2 to 3 years|
|More lenient||Leniency level||Less lenient|
Depending on your financial situation and future needs, you can opt for an HDB concessionary loan or a bank housing loan based on the comparison table above. You can also take advantage of HDB grants and different HDB downpayment schemes to ease the financial burden.
When purchasing an HDB flat under the Staggered Downpayment Scheme, you don’t need to pay all the downpayment upfront. You can pay the downpayment in parts, which helps you spread out the financial burden of owning a house. You also get more time to accumulate money for your second instalment. Note that it is only applicable for BTO flats and not when buying a resale flat.
According to HDB, under the Staggered Downpayment scheme, you can spread out the downpayment in two instalments:
The downpayment you need to pay under the staggered scheme depends on whether you take an HDB or bank loan. Let’s take a look at the table* below.
|HDB loan||Bank Loan|
|5% using CPF OA savings or cash||Instalment 1 (Downpayment at the signing of the agreement for lease||a) with a 75% loan ceiling: 5% in cash + 5% using CPF OA savings/ cash b) with a 55% loan ceiling: 10% in cash|
|10% using CPF OA savings or cash||Instalment 2 (Remaining payment during the collection of keys)||a) with a 75% loan ceiling: 15% using CPF OA savings of cash b) with a 55% loan ceiling: 35% using CPF OA savings of cash|
* If you have booked a new flat on or after 6 July 2018
So, if you are applying for a 3-room BTO flat with a purchase price between $300,000 – $400,000. Then you will have to pay the first part of the downpayment of $12,500 – $20,000 (5% of property value) at the time of lease signing and the second part of the downpayment of $45,000 – S$60,000 at the time of key collection.
Not every homebuyer is eligible for the staggered downpayment scheme. Let’s take a look at the eligibility criteria for the scheme.
You are eligible for the staggered downpayment scheme if:
The staggered downpayment scheme is also available to homeowners right-sizing to a 2-room Flexi or a 3-room flat in non-mature estates, regardless of their age.
A lot of Singaporeans are seen right-sizing their homes these days. Doing so allows them to unlock their home value for their retirement needs. To help elderly citizens smoothen the right-sizing process, especially if their funds are tied to their existing flat, HDB introduced the Deferred Down Payment scheme. This way, elderly flat owners need not worry about cash flow problems.
Essentially, this scheme allows homebuyers to defer their downpayment until key collection if they are right-sizing. For example, if a retiree is downsizing to a 2-room Flexi or 3-room BTO from HDB, they can defer their downpayment till the time of key collection. In other words, at the time of signing the lease agreement, you will only have to pay the stamp duty and legal fees.
However, if you cancel the flat application due to any reason, you will be responsible to pay the 5% (of the flat price) forfeiture fee.
If you are aged 55 years old or more, you may be eligible for the deferred downpayment scheme offered by HDB. You don’t have to apply for it seperately.
In addition to the age criterion, here are some eligibility conditions for the scheme:
As long as you fulfil these conditions, you will automatically be allowed to defer your downpayment until key collection.
Besides these HDB downpayment schemes, you can also apply for CPF housing grants to help reduce your expenses for your HDB flat purchase.
Depending on whether you buy a BTO flat or a resale flat, there are several housing grants first-time applicants can qualify for. Also known as HDB housing grants, these are given to lower- and middle-class individuals so they can also afford to buy an HDB flat in Singapore.
The grants are accredited to the individual’s CPF account (not disbursed in cash or bank account) after they have booked an HDB BTO or resale flat so that you can only use it for purchasing the house.
Assuming you are a first-time HDB buyer applying as a couple or family and fulfil all income ceiling requirements, the maximum grants you can get for HDB flats are:
|HDB type||CPF housing grant||Income ceiling||HDB grant amount|
|BTO flat||Enhanced CPF Housing Grant (EHG)||Monthly household income up to $9,000||$5,000 to $80,000 depending on the income (inversely proportional)|
|Resale flat||Enhanced CPF Housing Grant (EHG)||Monthly household income up to $9,000||$5,000 to $80,000 depending on the income (inversely proportional)|
|Resale flat||Family Grant||Household monthly income not more than $14,000||SC/SC household buying 2- to 4-room flat: $50,000 SC/SC household buying 5-room or bigger flat: $40,000 SC/SPR household buying 2- to 4-room flat: $40,000 SC/SPR buying 5-room or bigger flat: $30,000|
|Resale flat||Proximity Housing Grant (PHG)||None||$30,000 for families living with parents/child $20,000 for families living within 4km of parents/child $15,000 for singles living with parents/child $10,000 for singles living within 4km of parents/child|
However, please note that you must return all HDB grants (CPF grants) to your CPF OA with accrued interest.
To sum it up, the maximum grant one can get for BTO vs Resale flats:
HDB BTO grant: up to $80,000 (EHG)
HDB resale grant: up to $160,000 (EHG + Family Grant + PHG)
While there are plenty of choices that HDB can offer, be sure to assess all the options you qualify for before making a decision. Whether you choose an HDB BTO, resale flat or EC, it should be within your financial means.
Check if you have enough financial savings to make your initial downpayment before submitting the loan application and whether you meet the TDSR, LTV and MSR requirements. Remember that while it is important to make your savings grow with better-return investments or find ways to make some passive income, you must not put your HDB downpayment money in high-risk investments.
If you need any help regarding HDB or private property home loans in Singapore, don’t hesitate to connect with one of our friendly, qualified mortgage consultants at DollarBack Mortgage.
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