Loans, CPFs and grants: 3 ways to help finance your very first home, Money News

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Congratulations! If you are reading this, you are rightly considering buying a home for yourself and your family.

As a big deal with high long-term commitments, buying a home for the first time can be a huge deal, and we want to make the most of our decision.

Housing is becoming more and more expensive. In the second quarter of 2022, HDB resale prices increased by 2.6%, as private real estate prices increased by 3.5%. Therefore, here are three different tools that can help you finance your property and some other help with other costs.

Loans

In order to finance your home, you will most likely take out a loan. For Housing Development Board (HDB) and Executive Condominium (EC) apartments, there is the option of obtaining a loan from HDB themselves or taking out a bank loan, and as with private property, obtaining a mortgage with the bank or financial institution is the only option. Loans can be paid in cash or CPF funds.

HDB loan

HDB loans tend to be stricter in terms of eligibility. The interest rate on the loan is set at 0.1% above the prevailing CPF ordinary account interest rate, which may be revised from time to time in accordance with CPF interest rate revisions.

The interest due on the HDB home loan is calculated on the basis of a month of rest, or on such other basis as HDB may decide.

Your average gross monthly family income must not exceed: $14,000 for families; $21,000 for extended families (see guide for details); or $7,000 for singles purchasing under the Single Singapore Citizen (SSC) scheme Repayment period is capped at 25 years; until the buyer turns 65; or (Remaining lease of the apartment) – (20 years).

Your loan-to-value ratio (LTV) is limited to 85% of the purchase of the apartment or 85% of the resale price or the value of the apartment, whichever is lower. The loan limit is pro-rated if the remaining lease of the apartment does not cover the youngest buyer up to age 95 and beyond at the time of apartment application.

Financial institutions, such as banks and lenders, tend to be more flexible in their eligibility for loans; they also offer a much more competitive interest rate than HDBs. Private loan interest rates tend to vary depending on whether you get the fixed rate mortgage or the adjustable rate mortgage. To learn more about bank rates, click here.

However, note that your credit score is an essential indicator for banks to consider granting you their loan. You must also provide a source of income to prove that you can make regular payments. Private loans tend to have a lower loan-to-value ratio of up to 75%









Summary BHD loan Private loans
Interest rate 2.6% Generally lower than HDB
LTV limit 85% (if remaining lease covers youngest buyer to age 95). 75 percent
Private residences N / A Available
Citizenship At least one citizen of Singapore Available to Singapore citizens, permanent residents and foreigners.

CPF

other

The Central Provident Fund (CPF) is a mandatory pension scheme established by the Singapore government. They are usually divided into four different accounts. Ordinary Account (OA), Special Account (SA), Retirement Account (RA) and Medisave Account (MA). Click here to find out more about how the CPF works and how your pension is awarded.

We will focus on OA as these are the accounts that can be used to buy a house. There are a few requirements you need to consider when using your CPF

Your OA savings can be used to buy an HDB apartment or build private and residential properties in Singapore. OA Savings can also be used for down payment and home loans taken out for buying property, stamp and legal fees, loans taken out for building your house and buying vacant land for private properties, and Home Protection Scheme premiums for HDB flats.

Note that using CPF to pay your loans will result in a reduction in savings in your OA, which could affect your basic retirement achievement in the future.

HDB loan

Buyers/transferees can: Hold up to $20,000 of available savings in each of their regular CPF (OA) accounts and use savings from their CPF OA to pay stamp fees, registration fees, legal fees and premium for CPF Home Protection Assurance (if applicable).

The remaining balance of your CPF OA must be used to pay for the purchase of an apartment or the repossession of an existing apartment before the HDB housing loan can be granted.

bank loan

If you are taking out a home loan from a financial institution (FI), at least 5% of the down payment must be in cash.

According to the CPF website, funding your bank loan using CPF also has these limitations:

“You and your co-owners (if any) can use savings from your respective Ordinary Account (OA) up to the lesser of the purchase price or the property’s appraisal price at the time of purchase.

The total amount that all owners are allowed to use for your property will increase by 20% from the lower purchase price or the property’s appraisal price at the time of purchase. No other use of the CPF is permitted thereafter. »

Government grants

Government subsidies help those who buy HDBs; some subsidies are available for first-time HDB buyers. For family grants, the applicant must be at least 21 years of age. Obtaining a Housing Grant (Families) requires two Singaporean citizens.

If you have a non-resident spouse, you are only eligible for Singles Grants. Singles planning to live alone or with their parents must be 35 years of age or older.

Enhanced CPF Housing Grants (EHG)

Families coming for the first time may qualify for an Enhanced CPF Housing Grant (Families) of up to $80,000, while a couple consisting of a first and second may qualify for an EHG (Single ) of up to $40,000.

The EHG is designed for couples or families who are first-time seekers purchasing an apartment from HDB or a resale apartment on the open market or first-time seekers who are citizens of Singapore (SC) whose fiancé/fiancée/spouse has already received housing assistance.

To be eligible for the apartment, in addition to having been continuously employed for 12 months prior to applying for the grant, your average gross monthly household income (including all applicants and occupants) for the months worked during the 12-month period before applying for the apartment must not exceed $9,000

If purchasing with another single for the first time, up to 2 singles may each be eligible for an EHG (Singles) of up to $40,000, for a total of $80,000.

CPF housing aid for resale apartments

If you are buying a resale apartment instead of a BTO, the CPF Housing Grants for Resale Apartment (Families) is an appropriate subsidy for you with EHG.

You must be a Singapore citizen (or include at least a citizen or permanent resident), be new to housing grants and benefits, and your average gross monthly household income must not exceed: $14,000, or $21,000 if you purchase with an extension or multi-generational family. The remaining lease of the apartments must be more than 20 years and you can only apply for apartments with 2 rooms or more.







Maximum quantity First-time buyers Beginners and second couples
Buy a resale apartment from 2 to 4 rooms
  • SC/SC: $50,000
  • HC/SPR: $40,000

  • SC/SC: $25,000
  • HC/SPR: $20,000

Buy a resale apartment with 5 rooms or more
  • SC/SC: $40,000
  • HC/SPR: $30,000

  • SC/SC: $20,000
  • HC/SPR: $15,000

If you are a Singapore citizen (SC) for the first time and are buying a resale apartment on your own or with your non-resident spouse, you may be eligible for a $25,000 singles grant to purchase a resale apartment. 2 to 4 pieces. apartment or $20,000 for a 5-room resale apartment.

If you are a Singapore citizen (SC) for the first time and are buying a resale apartment on your own or with your non-resident spouse, you may be eligible for a $25,000 singles grant to purchase a resale apartment. 2 to 4 pieces. apartment or $20,000 for a 5-room resale apartment.

If you are buying with one or more other singles for the first time, up to 2 singles may each be eligible for a $25,000 singles grant to purchase a 2-4 room resale apartment (i.e. a total of $50,000) or $20,000 for a resale apartment with 5 or more rooms (a total of $40,000).

Subsidy for neighborhood housing (PHG)

If you buy a resale apartment to live with or near your parents/child, you can claim the following PHG (Families): $30,000 to live with your parents/child, or $20,000 to live near your parents/ child (within a radius of 4 km) .

And if you buy a resale apartment to live with or near your parents/child, you can claim the following PHG (single): $15,000 to live with your parents/child, or $10,000 to live near your parents /child (within a radius of 4 km).

Conclusion

Financing your home for the first time can seem extremely daunting, especially when so many options are available. However, with the right information, you can make the best decision for your long-term home financing.

Click on the relevant links to learn more about home loans that are suitable for both HDBs and private properties. You can also use the home loan calculator to find the best rates for your situation.

This article first appeared in ValueChampion.

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