There are options available for individuals looking to purchase a new property. Sometimes, an individual may be looking to buy a new property using the funds from a property they are selling. If the funds from the sale are unavailable because the property is yet to sell, they may opt for a bridging loan.
One of the options is for the buyer to seek a housing loan from the House and Development Board (HDB). The loan amount received provides the necessary financing to bridge the gap between selling the old property and acquiring the new one.
Apart from HDB itself, the buyer may opt for HDB bridging loans from financial institutions. The eligibility and criteria for these loans depend on the specific institution offering the loan.
Does HDB Offer Bridging Loan?
The Housing and Development Board (HDB) doesn’t offer bridging loans. They offer house loans to people looking to buy a second or subsequent property. The house loan on offer depends on the borrower having a property they are selling and waiting for the property transaction to close so they can complete the buying of a new property.
What Loan Does HDB Offer?
The Housing and Development Board (an agency of the Singapore government) offers HDB housing loans. This housing loan option is suitable for individuals looking to own a new property covered under the HDB terms of financing.
There are bridging loans offered by different financial institutions that comply with MAS (Monetary Authority of Singapore).
HDB Housing Loan
The HDB house loan offers people funds to buy new properties on the HDB market.
The maximum loan quantum is dependent on a variety of criteria. One such criterion is the value of the property one is buying. The maximum loan amount cannot exceed 85% of the value of the property one is looking to buy. The loan tenure of the bridging loans is 25 years.
Furthermore, the monthly instalment for the loan repayment is capped at 30% of the applicant’s monthly income.
Eligibility for A Housing Loan from HDB
- In cases where a buyer is a group, at least one of them has to be a citizen of Singapore.
- The borrower or borrower group should not have taken more than 2 other house loans from HDB.
- The applicant’s gross monthly income should not exceed $14,000 a family, for $21,000 for an extended family, or $7000 for singles.
- If you are selling an HDB flat to buy a new HDB property, you will be required to use at least 50% of the amount from the sale of the previous flat towards buying the new one.
- If you contribute monthly to CPF savings and your basic salary is fixed, you will be required to prove that you are in continuous employment and have received a salary for the last three months. However, you will be required to provide proof of income in the last 6 months if your salary is variable and you contribute to CPF savings.
How and Where to Apply
If you are interested in applying for a house loan from HDB, you may consider filling out the questionnaire at the official portal to see if you qualify. Additionally, one may apply for the HLE (HDB Loan Eligibility) letter to determine your qualification status.
Steps to Apply
- It is recommended that you first check if you qualify for an HDB house loan in advance before trying to buy a flat. You can do this by applying for an HDB Loan Eligibility (HLE) letter. The letter has a validity period of up to 6 months. You can apply online
- You will be required to provide information and supporting documents.
- The last step is authenticating the information through SingPass.
HDB Bridging Loans
It is necessary first to note that there is a considerable difference between HDB bridging loans and Temporary Bridging Loan Programme loans. The former is designed to help people looking to buy new properties, while the latter provides businesses with working capital.
The Housing and Development Board does not provide HDB bridging loans but rather various financial institutions like banks. In most cases, these bank loans will have a shorter repayment period of up to six months. However, other banks offer bridging loans with more extended repayment periods.
How It Works
There two types of HDB loans capitalised interest bridging loan and simultaneous repayment bridging loan. To understand how an HDB bridging loan works, you must first understand its design.
Say you already own a flat you want to sell and have listed, but the sale is not yet closed. At the same time, there is a new HDB flat that you want to buy but do not have the funds for, and you are waiting for the sale to go through to get the funds to make a down payment on the new flat. This is where you can apply for a bridging loan amount to help you put down the down payment as you wait for your property to sell.
Look at the example below with figures to get a better understanding:
- You have a property you are selling that will bring in $500,000
- The new property will costs $1,000,000
- The down payment for the new property is $250,000
- You only have $50,000
- The bridging loan package you can get offer a 75% LTV ratio of the purchase price, which equates to $750,000
Even though the sale of your property will give you half a million, the sale has yet to occur. So, the amount you have at hand is $50,000, but to secure the new flat, you will be required to pay $250,000 as a down payment.
You cannot use the house loan to pay the down payment; thus, you can apply for a bridging loan of $200,000. The loan and the $50,000 will be enough to cover the down payment and secure the new flat you want to buy. The house loan will cover the rest of the cost for the new flat.
How and Where to Apply
One can apply for HDB bridging loan packages from different financial institutions offering these types of loans. Good examples of banks offering such loans include OCBC and Standard Chartered banks. You should follow the loan application process outlined by the financial provider of your HDB bridging loan.
Eligibility and Requirements to Get an HDB Bridging Loan
While each bank or financial institution giving you the loan might have its own set of criteria they look at, there are a few that are common. These include:
- Applicants should be employed or have a monthly income.
- Applicants have to be 21-65 years.
- The applicant, or one of the applicants in case of a group, should be a citizen of Singapore.
- The flat you sell and the one you buy should be on the HDB market.
Best Bridging Loans in Singapore 2022
Several banks and financial institutions offer bridging loan packages to citizens in the country. Some of the best loans available in the current financial market include:
- DBS Bridging Loan
- UOB HDB Home Loan
- Standard Chartered HDB Bridging Loan
- Maybank HDB Home Loan
- Fortune Credit Bridging Loan (Alternative Option)
1. DBS Bridging Loan
This is a bridging loan offered by the Development Bank of Singapore. The loan attracts one of the lowest bridging loan interest rates in the financial market.
The part about this bridging loan is that it can be used to acquire different property types. The repayment period of the loan is 6 months.
2. UOB HDB Home Loan
This loan from the United Overseas Bank Ltd offers borrowers a maximum repayment period of 6 months. The interest rates on loans are between 4% and 5%.
The loan is only available to a person looking to acquire a new HDB listed on the HDB market.
3. Standard Chartered HDB Bridging Loan
Standard Chartered offers a bridging loan only available to people looking for funds for their next property purchase. The property loan is unique from most in the market because the borrower has to pay SIBOR rates for their loan for three months on top of an annual interest rate of 2%.
4. Maybank HDB Home Loan
Maybank offers one of the best loans in terms of the repayment period; 1 to 4 years. The loan is only for those looking to purchase flats on the HDB market. Maybank HDB home loan has the lowest interest rates in the market.
5. Fortune Credit Bridging Loan (Alternative Option)
If you need urgent cash, licensed moneylenders can help you. At Fortune Credit, you can take a bridging loan you can use to fund the acquisition of your next property.
We approve loans faster, usually within the day if you have complete requirements, compared to most banks. The maximum loan quantum is up to 6x your monthly salary, and the interest rate is 1-4%.
Comparison Table of the Top Bridging Loans in Singapore
|Interest Rate||Tenure||Property Types|
|DBS Bridging Loan||Offer a prime rate||Up to 6 months||Any property|
|HDB Home Loan (UOB)||4-5%||6 months||HDB properties|
|HDB Bridging Loan (Standard Chartered)||· SIBOR (3 months) plus 2% PA interest on the loan||· Up to 6 months||· HDB properties|
|HDB Home Loan (Maybank)||· Lower than 2% (between 1.30% to 1.60% PA)||· 1 to 4 years||· HDB properties|
|Fortune Credit (Licensed Moneylender)||1-4%||Up to one month or until the property’s completion date||Any property|
Maybank has the best HDB loan. The bridging loan interest rates on their bank loan are the lowest of all the options we have highlighted above. On top of this, the repayment period is also the longest. The only downside is that the loan is only available for HDB properties. A great alternative is Fortune Credit Bridging Loan.
Factors to Consider When Applying for A HDB Loan
Rates are vital. Ensure you carefully compare the interest and pick the lowest available.
The repayment period will vary depending on the provider. Remember that the longer the repayment period, the more money you will have to pay to service a high-interest rate on your loan.
Ability to Pay
Your income will not only determine the maximum home loan quantum you can access by also the monthly repayment premiums. Ensure that the monthly repayments do not exceed 30% of your income.
Cash at Hand
The more cash you have at hand, the lower the amount of loan you will require. It is best to put in as much money as possible to get a lower loan.
Frequently Asked Questions
Can you use CPF funds for bridging loan payments?
You can. If you sell the property you had on the market and your CPF savings are refunded, you can use the money to make a bridging loan repayment to your bank.
What is the average interest rate for bridging loans?
The average interest rates range between 3-6%. Some providers have home loans with lower rates than these. Moneylenders such as Fortune Credit and others offer an interest rate of 1-4%.
How do you repay a bridging loan?
In most cases, you must make monthly loan repayments for the loan duration. You may also opt for lump sum payments if your provider allows it.
HDB offers house loans for people looking to purchase new properties on the market but don’t have enough cash. However, it does not offer HDB bridging loans. These can, however, be accessed through different financial institutions.
- HDB house loan has a repayment period of one month or the time when the property purchase is completed.
- Bridging loans only cover part, or all, of the total down payment for a new house.
- To get a bridging loan, one has to have a property that they are selling, and a new property they want to use the loan to must have an OTP (Option to Purchase).
Fortune Credit has, over the years, built a reputation of being one the best moneylenders in Singapore. Contact us today and receive a free loan quotation based on your needs.