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Apply For First Time Home Buyer Loan Online – Visiting showrooms and speaking to real estate agents can make buying a home in Singapore a breeze. However, as you delve deeper into the details, you’ll find that there are more complex aspects of the game.
For example, managing finances, document flow, and navigating between different solutions can complicate this process.
Apply For First Time Home Buyer Loan Online
There are several important considerations such as: Will you take a loan from HDB or a bank? How much is the down payment? What are LTV, MSR and TDSR?
What You Need To Know Before Getting A Home Loan
When you buy an HDB flat, you have two loan options – an HDB loan or a bank loan. To make your decision, consider the following factors:
To qualify for an HDB loan, your monthly family income must not exceed $14,000 ($7,000 for singles, $21,000 for large families).
Additionally, you must not have owned any personal property in the past 30 months. If you don’t meet these criteria, you’ll need to think about a bank loan instead.
If you opt for an HDB loan, you can borrow up to 80% of the value of your home. With a bank loan, however, you can only borrow up to 75%.
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If you decide to take out a bank loan, you will need to deposit 25% of the sale value of the property, at least 5% in cash.
For HDB loans, the interest rate on your mortgage is typically 2.6% per annum. (based on the current CPF interest rate of 2.5% + 0.1%) which has not changed over the years.
Bank loans, on the other hand, offer a variety of loan packages, each with different interest rates. This variety gives you more options when choosing a loan that suits your needs.
Generally, a fixed-rate mortgage offers predictability and stability in monthly payments because the interest rate remains the same for a fixed period of time (typically 2 to 5 years). A fixed-rate loan makes sense in a high-interest rate environment because it protects against possible interest rate increases over a longer period of time.
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Variable rate loans often have lower initial interest rates than fixed rate mortgages. The interest rate is usually set at the Singapore Overnight Average Rate (SORA) or the Fixed Deposit Rate (FDR).
If interest rates stay the same or decrease over time, you may pay less interest than you would on a fixed-rate mortgage. Keep in mind that the higher the interest rate, the higher the monthly payments will be.
With a two-in-one home loan, you can have peace of mind using part of the loan amount on a fixed rate package and earning interest on the rest of the loan amount on a variable rate package.
In short, a bank loan can offer a lower interest rate than an HDB loan. The biggest downside is that you have to keep an eye on the interest rate as it can change in two to three years. You may need to refinance (with the same bank) or refinance (choose a different bank for a mortgage) your home loan.
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There is always the option of refinancing from an HDB loan to a bank loan to get cheaper interest rates at any time. Please note that appraisals and legal fees may be incurred when refinancing. Therefore, it’s a good idea to look at the whole package, not just the interest rates. The same applies to revaluation.
The LTV ratio indicates the amount of the loan in relation to the value of the property. Either an initial loan or 75% on a bank loan or 80% on an HDB loan. In some cases, you may not get 75% and 80% because the financier considers your TDSR when you apply for a home loan.
TDSR is the portion of your income that goes towards all your debts like car loans or education loans. For a home loan, your TDSR cannot exceed 55% of your gross monthly income.
The MSR only applies if you buy an HDB flat or an Executive Condominium (EC). This limits your monthly payments to 30% of your gross monthly income.
First Time Homebuyer Loans And Requirements
Here is an example of how TDSR and MSR affect your monthly loan repayment amount (if you earn $5,500 per month):
TDSR: Since the TDSR is 55%, you can spend up to $3,025 per month on loan repayments (of all types).
MSR: Since the MSR is 30%, you can spend up to $1,650 per month on your HDB/EC home loan. (This $1,650 per month is less than your entire credit budget of $3,025.)
When you take an HDB loan, most of your savings in your CPF Ordinary (OA) account will be used for the down payment. You can set aside $20,000 in your CPF OA as these funds provide you with a guarantee of making monthly payments in the event of unforeseen circumstances such as a temporary loss of income.
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A bank loan allows you to keep your savings in the CPF and pay the entire down payment in cash if you have cash.
To understand the loan limit above, you can use a home loan calculator to estimate your monthly payments. Longer loan terms mean lower and easier payments.
You also have the option to use your savings in your CPF Ordinary (OA) account to pay off your mortgage payments.
Paying with CPF is certainly attractive if you need cash flow for day-to-day spending and investments, but it means you’ll have to give up 2.5% risk-free interest on your CPF money.
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When the property is sold, the CPF OA funds you used must be returned with accrued interest.
Cash repayment of the loan allows you to leverage your CPF-OA savings at an interest rate of 2.5%. You can keep the proceeds from the sale without topping up the CPF.
If you have the money, you may consider partially paying off your home loan to save on interest payments. Please note that some banks charge a partial repayment fee. Therefore, weigh the pros and cons before proceeding.
If you decide to take out a bank loan, consider getting Approval in Principle (IPA) to better understand your borrowing capacity and simplify the purchasing process.
First Time Home Buyer Guide
This is a document from the bank showing how much it is willing to lend you considering your TDSR, MSR, income and credit score.
Before you pay an option fee on your home, you need to secure your IPA. This is important because if you find that you cannot get enough credit for the property, you will not receive a refund of the option fee. In some cases, real estate agents may request your IPA before proceeding with a transaction.
An IPA also helps speed up the loan origination process. More importantly, knowing your maximum loan amount will help you avoid becoming emotionally attached to homes that are outside of your budget. You can set realistic expectations and make informed decisions when looking for an apartment.
This way you know for sure how much you can borrow for your home and know your budget exactly. Are you planning to apply for BTO in the near future? Savings and housing subsidies can help you buy a new home.
Form 5405: First Time Homebuyer Credit And Repayment Of The Credit
After months of negotiations, Praveen and Priyanka are ready to apply for BTO! With a total family income of $5,500, they want to buy a 4-room BTO apartment in a property worth around $300,000.
Depending on their income, they will be eligible for a $40,000 Enhanced Housing Grant (EHG), which can be used toward a down payment and a portion of the purchase price. They plan to finance the remaining purchase price with a 25-year HDB home loan.
With this in mind, they calculate their expected expenses and figure out how to use their savings in the Ordinary Account (OA) for their housing needs.
First Task: During the sale, Praveen and Priyanka have to submit an online BTO application along with a fee of $10.
First Time Homebuyer Loans And Programs
After voting for the queue number, they will be asked to book an apartment. Since they have decided to take an HDB home loan, they are required to submit a valid HDB Loan Eligibility Letter (HLE) and prepare relevant documents at the time of their first HDB appointment. When booking the apartment, they must pay an option fee of $2,000 in cash for a 4-bedroom apartment.
About four months after booking the apartment, Praveen and Priyanka have to sign the rental agreement and pay the deposit. Since they intend to take out an HDB home loan, the deposit is 10% of the purchase price – $30,000 – and can be paid for using the Home Improvement Grant if necessary.
Other costs at this stage can be covered by OA savings, such as the buyer’s stamp duty, which can be calculated using the IRAS stamp duty calculator. If Praveen and Priyanka hire HDB to buy the flat, they can also use their OA savings to pay the transfer fee. This can be calculated using the HDB’s legal costs inquiry tool.
Praveen and Priyanka collect the keys to their new home and are ready to go
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