 | | It would not be reasonable to expect banks to offer loans for the purchase of HDB flats if they do not have the first charge. | | | | | |  | |
HDB continues to provide concessionary interest rate loans for eligible Singapore citizen families who are buying their first subsidised flat, as well as second-timer households who are upgrading to bigger flats.
Those who are not eligible for HDB's concessionary rate loans include families who have already enjoyed two concessionary loans, households with a monthly household income exceeding $8,000, private property owners, and Singapore permanent residents.
The banks stepped in to provide mortgage loans to these categories of flat buyers from Jan 1, 2003, when HDB ceased providing market interest rate loans.
Just as HDB has first charge on the property when it provides loans to flat buyers, banks similarly take first charge on the HDB flat for bank loan cases, followed by the CPF Board.
It would not be reasonable to expect banks to offer loans for the purchase of HDB flats if they do not have the first charge.
This charge order is similar for the purchase of private property.
In the event of borrower default, the banks are able to make effective use of the mortgaged property to mitigate their losses. It also enables them to offer more loan options to their customers.
As owning a home is a long-term commitment, buyers need to be prudent in their property purchase. To help them plan their finances carefully, HDB has introduced several initiatives over the years to educate and assist flat buyers.
These include providing simple financial calculators on line to help potential buyers with financial planning, as well as financial counselling by HDB staff.
As a further step, HDB now requires those applying for HDB loans to obtain an HDB Loan Eligibility Letter before they commit to a flat purchase.
HDB flat buyers taking bank loans would need to have a Letter of Offer from a bank before they can accept the Option to Purchase.
By exercising financial prudence, home buyers can minimise the risk of running into financial difficulties when servicing their mortgage loans.
Tay Boon Sun
for Director,
Corporate Development
Housing & Development Board
