July 14, 2020

Singapore: HDB Priority Schemes

When it comes to HDB property financing, would-be home buyers can make one of two choices: either take out an HDB concessionary interest rate loan or take a home loan from financial institutions (FIs), such as banks. The first option allows potential home buyers to use the CPF (Central Provident Fund) savings money lender singapore to pay for the property and offers a less fluctuating variable interest rate than those provided by financial institutions, thus giving borrowers more stability and predictability.

With financial institutions, the maximum loan amount is 90% of the purchase price, with 10% to be funded by private funds, of which 5% will be cash. Moreover, as previously stated, the interest rates in the case of FI loans often fluctuate more drastically than those offered by the HDB, as each financial institution has their own credit-rating system. If the residential property is a completed private one, the Normal Payment Scheme can be used, in which buyers will pay the initial 5% in cash, then use their CPF savings to finance their mortgage loan.

If, however, the property the buyers are applying for is still under construction, the Progressive Payment Scheme applies. Under this scheme, the bank and the developer determine the payment schedule for the home buyer, which depends on the stages of completion of the construction project. The payment will be a standard percentage of the purchasing price, and the scheme will ensure that the payment is finished when the project is done.

Before considering the loan tenure buyers are going to commit themselves to, it is important to be aware of the fact that the longer the tenure, the more interest will be paid. Choosing the right mortgage for specific needs can save tens of thousands of dollars in the long run.

Mortgage brokers offer the benefit of finding a bank or a direct lender that can give individuals a specific type of loan that they are seeking. They still represent a new concept in Singapore, and not all banks are tied to them, but the population’s awareness of the advantages of mortgage brokers is increasing.

Nevertheless, once an informed decision has been made, a loan application can be submitted, after which the lender will decide the loan tenure and the amount of money they will offer, then hand over a Letter of Offer, after which they will explain the terms and conditions to the borrower. Upon acceptance of these terms, the borrower will sign the Letter of Offer and all documents will be processed.

 

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