Explaining the Advantages of HDB Loans Versus Bank Loans (An Abridged Version)

Before 1 January 2003, people buying a HDB (Housing Development Board) flat have to finance it either with a HDB Concessionary Rate Loan or a HDB market rate loan. But since then the HDB market rate loan was replaced by home mortgage from financing institutions, which are gazetted by the Monetary Authority of Singapore.

HDB Concessionary Rate Loan

Compared to a home loan from a financing institution, a HDB loan has more stringent eligibility requirements. The below covers most of them.

Eligibility Criteria:

For HDB flats only (resale or direct purchase from HDB)
At least one buyer must be a Singapore citizen
Must have a gross monthly income not exceeding $10,000 (or $15,000 for extended families)
For DBSS flat the income ceiling is $8,000 (or $10,000 for extended families)
For applicants under the Single Singapore Citizen (SSC) scheme, the income ceiling is $5,000
Must not own any private residence (in Singapore or abroad), including HUDC and executive condominium
Must not have sold a private residential property within 30 months and taken a HDB loan before
Must not have previously obtained a HDB loan within 30 months
Must not have taken more than two previous HDB loans
Must not own more any market / hawker stalls or commercial / industrial property (Except if you operate the business yourself, have no other source of income, and only own one market / hawker stall or commercial / industrial property)

From July 2013, HDB loan will not be granted for flats with less than 20 years of lease. In addition, for flats with lease between 20 and 59 years, loan approval and tenure will be subjected to certain conditions.

Given the many restrictions of a HDB loan, why then do Singaporeans still want to take one? We delve further into the pros of this loan in the following sections.

1. Higher CPF (Central Provident Fund) withdrawal limit

For financing by bank loans, the CPF Ordinary Account withdrawal cap is up to 100% of the valuation limit (VL), which is the lower of the purchase price or valuation at the time of purchase. If the loan is still outstanding when this limit is breached, the housing withdrawal limit can be increased to 120% VL provided that half (entire) of the prevailing Minimum Sum is set aside for borrowers below 55 (55 and above). This housing withdrawal limit varies with the purchase date of the flat, for purchases from 2008 onwards it is 120%.

With a HDB concessionary loan, however, you can enjoy a higher withdrawal limit.

For direct purchase from HDB, there is no limit to the saving in the Ordinary Account you can use.

For resale HDB flats, there is no limit to the saving in the Ordinary Account you can use, after you have set aside half of the prevailing Minimum Sum.

An Auto Title Loan Is A Secured Loan Until Paid Off, Completely

Secured debts are not all the same. Depending on what type of loan you receive, payments may be extended over decades or expected within 30 days. The one aspect to a secured loan is that if the loan is defaulted up on in any way, the lender may seize the property which was used to secure the initial loan. An auto title loan uses the pink slip where as a second mortgage would use your home’s title.

People looking for much needed cash tend to overlook the potential consequences of secured loans. Reading through the terms and conditions of any type of loan is essential prior to signing.

The short-term style to this loan brings fast money to the wallet of the applicant, but the 30 payoff expectancy, accompanied by high interest, when not paid off on time can bring a stressful financial situation to the next level of crazy. These title loans carry fees which are included in the loan payoff. The high interest creates budget woes each month and when a person has to take money from other monthly payments in order to keep paying against the interest, trouble brews all over. A lender has the right to seize the vehicle for any type of default on the loan. Some lenders may forgive errors in order to collect more in the long run. Unfortunately, you may find a lender which will take the car for resale automatically instead of dealing with the hassle of collecting past due moneys. Questions about collections practices are valuable to inquire about prior to signing.

When you have used your home as collateral for a new loan, most often there already is a loan out for the initial purchase. Second mortgages or refinancing loans are often done in order to obtain extra money for repairs or improvements. These types of loans are processed through banks, credit unions or private mortgage brokers; the process may take a few weeks and credit history is a large factor in approval. The interest is much lower for these long-term loans and the monthly payments are calculated to be something affordable or the loan will not push through. Just like the title loan, if loans go into default your home will be at risk of seizure. A bank can put your home on auction and give you four days to move out. It wasn’t part of the plan when you took out the loan, but how you managed the debt may result in this or similar actions.

Guarantors are people who co-sign on loans. A lender feels more secure loaning to a person with no credit or poor credit because a person with great credit has signed to take responsibility for the loan if the borrower fails. There is no property loss, but a relationship could be ended as the result of the loan gone badly.

Whether you need $2,000 or $20,000, a secured loan is an option for lenders to do business with people that may present a larger risk factor. Something to keep in mind is that a bank or auto title lender has the option to seize your property up until the loan is fully paid off. It would be a shame to lose your home or car when the build of the loan has been paid.