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Housing Loan Planning Advices

HDB’s HLE Scheme and Prudent Planning

  • lst Jan 2007 - HDB implemented the Housing Loan Eligibility scheme (HIE) for both direct and secondary market purchases.
  • All home buyers must ensure that they have the financial ability to make the purchase.
  • Private property buyers should seek comprehensive housing loan planning assistance prior to any purchase.
  • Buyers should not make hasty decision to purchase in the hope of making a quick investment return.
  • It is not only the initial 5% cash deposit that the buyer should be concern with.
  • Financial institutions today have very thorough and stringent credit approval processes.
  • Familiarize yourselves with CPF's latest guidelines and policies pertaining to property purchases.

A Prudent Mortgage Plan

  • Before you start your house hunt, a proper budget must be set and a detailed mortgage calculation done.
  • Do not clean out your cash and CPF reserves at the initial stage.
  • You must know the stability of your job and future income.
  • Sufficient insurance coverage to protect your investment.
  • CPF Minimum Sum Scheme
  • Familiarize yourself with the latest housing loan packages.
  • Good to know:

-monthly cash and CPF repayments
-principal vs interest payments,
-breakeven point to turn over a profit,
-rental returns vs interest payments,
-investment return and yield,
-cash and CPF breakdown,
-cash proceeds,
-and insurance required.

  • Speak to your existing financier or to an experienced mortgage planner.
  • Some features to look out for:

-Fixed interest rate
-Variable interest rate
-Blended rates
-Pegged rates
-Interest servicing only
-Linked account
-Loan tenure
-Lock in period
-Claw back
-Progressive payment scheme
-Different payment scheme

-Types of loans offered: housing loan, bridging loan, construction loan, OD and 5th charge term loan


Factors That Financial Institutions Take Into Consideration When Approving A Loan

  • Monthly income 
  • Monthly CPF contributions
  • Existing funds in the CPF Ordinary Account
  • Other existing financial commitments
  • Employment profile
  • Age of borrower
  • Nationality
  • Debt Servicing Ratio (the ratio of affordable repayment based on gross financial commitments)
  • Bankruptcy
  • Credit History
  • Financial strength of joint borrowers (if any)
  • Liquidity