BTO/HLE Eligibility & CPF Update

I started the year with a big question mark and concern. Luckily, I managed to get a good queue number when I first started working, meaning that we are able to get a little grant (SGD5k) that can be use during the first down-payment. On the reason why it is only SGD5k, it is due to my HDB location is in the matured estate, I’d pay the premium for location.. and it’s not like value of the house will fall drastically; “HDB resale prices climb 4.8% in 2020” posted by CNA on 4th Jan 2021 (https://www.channelnewsasia.com/news/singapore/hdb-resale-prices-2020-q4-flats-bto-launch-flash-estimates-13888448)

Concern on HLE Eligibility and Loan

As many know that HDB loan has a combined income ceiling of SGD14k, not a difficult figure to hit tbh. While being able to get a grant for BTO, also mean that the assessed income was low. I was only given around 50~60% loan of my BTO value which was my main concern. I was afraid that if HDB might reject our HDB loan application if our incomes were to be above the SGD14k ceiling meaning I have only 2 choices;

1. Get a bank loan, which means you need a bigger down-payment of 25%, meaning that we have to pay 20% instead of the addition balance of 5% for the total 10% down-payment for HDB loan
2. Continue with HDB loan and pay down the 40~50% differences, which is impossible for us, and personally I don’t like to waste the opportunity of my cash earning more money elsewhere

So I googled, like what most of people will do, but I didn’t get much answers. I think this is a fortunate problem since most problems revolve around “loss of income”, “loss of job”, etc which people are concern about getting their loan lower after re-assessment.

I then went on to proper channels and reach out to HDB via e-mail to voice my concern, and they actually called me back within 3 working days (surprising for Government board entity).

SOOO.. the answer I got was income ceiling for HDB loan is only accessed when you apply for HLE during your BTO to “check” your eligibility to apply for “budget housing”. Regardless of how little (the less the better, since more grant), you’ll get reassessed nearer to the key collection date whereas HDB will require you to submit documents to prove your “earning ability”.

The short answer I got was; regardless of how much income you earn above the ceiling, you are still eligible for HDB loan. I decided to write about this because I didn’t manage to find any proper answers online. (wipe my sweat)

HDB Loan vs Bank Loan

As many people already knows, I value the opportunity of my capital so why did I opt for HDB loan?

HDB loan has a lower outlay, 10% versus 25%, do your math and it’ll make sense. I also have intention to eventually move to bank loan hoping that the low interest rate environment will last much longer (Fed expects no interest rate hike until 2022). My key collection will be in late 2022… however, while Fed starts hiking interest rate, it is not an immediate action, especially it won’t jump back to pre-Covid rates which allows me to lock in some good bank loan rates in the future (fingers crossed). However, I haven’t really gotten down to do the math on my estimated timing of transition to bank loan.. will get back to this in future posts once I gotten to it.

CPF Update

After getting the answer from HDB.. I’d continued to transfer my OA to SA, I actually keep my OA under SGD20k because my SA is still way under SGD40k.. which I’d love to leverage on before growing my OA up. I only keep around SGD15~20k in my OA to prep for any early key collection.. but I intend to max out SGD40k on SA, then I will keep the HDB down-payment requirement buffer above the SGD20k on OA.

In case you don’t understand why SGD20k on OA and SGD40k on SA;

• SA basic interest is 4%pa, but on the first SGD40k, you get additional 1%pa meaning a whooping 5%pa
• OA basic interest is 2.5%pa and on the first SGD20k, you also get additional 1%pa putting it at 3.5%pa
• In addition the excess interest rate will actually flow into your SA instead of OA, even if you earn 3.5%pa on your OA, you’ll only get 2.5% in OA and the other 1% goes to SA

Conclusion

Ultimately, my goal is to share the message to people in similar situation with me for BTO.. you can trust me on this!

I will come to posting what I am doing to earn excess money as well.. keeping me up at night.

Cheers~