Breaking Down the HLE Loan: Here’s What You Need To Know

by Michelle Goana
Breaking Down the HLE Loan

If you’re applying for a new HDB flat or buying one from the resale market, you can either pay for it in full, take a bank loan, or get the HDB concessionary loan. 

Most people will want to get an HDB loan however, first-time homeowners are usually unfamiliar with the process of obtaining it and the HDB Loan Eligibility (HLE) letter. This article will break down for you what the HLE letter is, and how to go about applying for an HDB Loan. 

HDB Loan Eligibility (HLE) 

The eligibility requirements set by HDB are: 

  1. At least one buyer is a Singapore citizen
  2. Household status 
    • Have not taken two or more housing loans from HDB previously
    • Have taken one housing loan from HDB and the last owned property is not private residential property (local or overseas) such as HUDC flat, property acquired by gift, property inherited as a beneficiary under a will or as a result of the Intestate Succession Act, or a property owned/acquired/disposed of through nominees
  3. Income Ceiling
    • The average gross monthly household income does not exceed 
  1. $14,000 for families
  2. $21,000 for extended families
  3. $7,000 for singles buying a 5-room or smaller resale flat or a 2-room new flat in a non-mature estate, under the Single Singapore Citizen (SSC) Scheme 
  4. Ownership 
    • Must not own or have disposed of any private residential property in the 30 months before the date of application for an HDB Loan Eligibility (HLE) letter
    • Do not own more than one market/hawker stall or commercial/industrial property
    • If you own only one market/hawker stall or commercial/industrial property, you must be operating the business there, and have no other sources of income 
  5. Remaining Lease
    • The loan amount will depend on the extent the remaining lease can cover the youngest buyer to the age of 95
    • You can use the payment plan calculator to find out the payments required at the various milestones for the purchase of a new or resale flat

It is important to note that HDB does not regard the following as part of your monthly household income:

  • Alimony or maintenance fees
  • Scholarship overseas allowance
  • Pension
  • Bonuses
  • Claims/reimbursement/expenses
  • National Service allowance
  • Director’s fees
  • Occupier’s income
  • Income from ad hoc overtime work
  • Rental income
  • Dividend income or interest from deposit accounts
  • Overseas cost of living allowance

HDB Loan Eligibility (HLE) Letter

If you’ve checked off all the requirements, you can apply for the HDB Loan Eligibility Letter (HLE). The HLE letter is a financial planning tool that will provide information on the: 

  • Eligible loan amount
  • Monthly instalments
  • Repayment period
  • Amount of cash proceeds from the disposal of the existing or last-owned flat to be used to pay for the next flat (if applying for a second HDB housing loan)

The HLE letter lets you know the loan amount you’re able to obtain and the projected monthly repayments, so that you will buy a flat within your means without overstretching your dollars. This letter will be valid for six months from the date of issue. 

The HDB loan and your CPF/cash savings will then determine your available budget for the flat. Three key factors that will determine your loan amount are: 

  1. Your age
  2. Your income
  3. Your financial standing

You will most likely be able to get a higher loan amount if you are younger, as it is implied that you will have more years to pay off the loan before you retire. 

Applying for the HDB Concessionary Loan

You can apply for the HLE letter online and you should have it ready before buying a Build-to-Order (BTO) flat, signing the Option to Purchase (OTP) for a resale flat, or applying for a transfer of ownership of an HDB flat. 

After getting the HLE letter from HDB, you will need to log onto the HDB portal and upload the necessary documents. HDB will usually reply within 14 days on the outcome, and you can track its progress here

Here’s a list of documents you will need to prepare depending on your type of employment and CPF contributions: 

  1. Employed with monthly CPF contribution
    • Three months’ payslips (sample
    • Latest 15 months’ CPF contribution history (sample
  2. Employed without monthly CPF contribution
    • Six months’ payslips (sample
    • Credit Bureau report (sample)
    • Latest six months’ bank statements/passbook (sample
  3. Self-employed 
    • Latest Notice of Assessment from IRAS or Certified Annual Statement of Accounts from an audit firm (sample)
    • Credit Bureau report (sample
    • Latest six months’ bank statements/passbook (sample
  4. Commission-based and part-time worker
    • Six months’ commission statements or payslips (sample
    • Latest 15 months’ CPF contribution history (sample)
    • Credit Bureau report (sample)
    • Latest 6 months’ bank statements/passbook (sample
  5. Odd job worker
    • Latest Notice of Assessment (sample) from IRAS or a recent letter (sample) from the employer certifying job designation, commencement date, and commission/salaries for at least six months preceding the month of application
    • Latest 15 months’ CPF contribution history (sample)
    • Credit Bureau report (sample)
    • Latest six months’ bank statements/passbook (sample)
  6. Unemployed 
    • If you are a full-time student aged between 18 to 62, you will need to submit a valid Student Pass 
    • If you have been unemployed for less than 3 months, you will need to prepare an income proof for the preceding month(s) from the previous employer stating your gross monthly income and last day of service and your latest 15 months’ CPF contribution history (sample

HDB Loan Interest Rate

HDB’s current concessionary interest rate is at 2.60% p.a. This figure has remained stable for quite a long time. This appeals to homeowners who are able to set aside a fixed amount every month for the repayment without worrying about sudden surges in the interest rates. 

HDB’s interest rate is also a higher than what bank loans have to offer which have not exceeded 2% in the last couple of years. HDB also allows you to finance up to 90% of the cost of your flat, whereas bank loans only allow up to 75%. 

Cost and Fees for New Flats

HDB lists down the payments you need to make on their website

  • Submitting an application 
  • Option fee
  • Downpayment
  • Stamp duty and legal fees payable when signing an Agreement for Lease
  • Stamp duty and legal fees payable during key collection
  • Home Protection Scheme (HPS)
  • Fire insurance 

Among all the costs, the downpayment can be one of the most important factors to consider when purchasing your first HDB. If you have opted for the HDB loan, the downpayment will be 10% of the purchase price. You can choose to make this payment through the savings in your CPF Ordinary Account (OA) and with cash. 

For example, you and your spouse have checked that the total amount in both of your CPF accounts amount to $30,000. This means that you should be able to comfortably afford an HDB flat that does not exceed $300,000, as you will have to pay the remainder of the downpayment in cash if you choose to buy a more expensive HDB flat. 

Common FAQs on HDB eligibility

  1. Am I eligible to apply for BTO? 
    – The minimum age to buy a BTO flat is 21 years old
    – At least one of the buyers must be a Singapore citizen, the other buyer must either be a Singapore citizen or Singapore Permanent Resident
    – The monthly gross income must not exceed $14,000 for a 4-room or larger flat
  2. How do I know if I’m eligible for a HDB? 
    – You can check using HDB’s questionnaires on their website
  3. How much loan can I get? 
    – Your gross monthly income cannot be more than $14,000 ($7,000 for singles and $21,000 for extended families) to qualify for an HDB loan
    – The maximum Loan to Value Limit (LTV) for HDB loan is 90%, after taking into consideration the Mortgage Servicing Ratio (MSR) and Total Debit Servicing Ratio (TDSR) with a cap of 30% and 60% respectively 
  4. Can I buy a HDB without a loan? 
    – Yes you can, and you will not need the HLE letter from HDB or Letter of Offer from a bank
    – You will then need to state that you will be buying the HDB with CPF and/or savings 

Related Posts