Q MY RETIRED parents recently bought a two-room HDB flat on the open market for about $120,000.
We have some savings to cover half the purchase cost and were hoping to get a $60,000 mortgage, which I would pay monthly with cash.
Unfortunately, most of the banks I approached do not offer financing for two-room HDB flats.
I ended up taking on personal loans and an overdraft facility to make up the shortfall.
But I am now paying an interest rate of as much as 16 per cent.
Is there any avenue for me to pledge the flat for a more reasonable repayment scheme?
A As you have discovered, most banks do not grant loans for two-room flats, but I believe that Hong Leong Finance and Standard Chartered Bank (Stanchart) do offer mortgages for such flats.
For Hong Leong Finance, the minimum loan amount is $60,000, while at Stanchart, the minimum loan amount is $100,000.
Based on your current situation, the HDB flat is actually fully paid up.
Under HDB rules, it is not possible for you to pay off your personal loan and overdraft facility by 'pledging' the HDB flat as collateral.
Assuming that you do not own any other HDB flat, a possible option is for your parents to sell this flat and buy another HDB flat with you as one of the owners.
By doing so, you might be able to get a bank loan to finance the purchase of the next HDB flat provided that your credit profile is healthy and you fulfil the minimum loan requirement of $60,000.
Before you do so, it is advisable to get prior loan approval by submitting an application with all the relevant information, including the estimated purchase price, loan amount required, your income documentation and your existing loan commitments.
The institution will also check with Credit Bureau Singapore on your credit record before deciding whether to grant you the loan.
From January, before anyone commits to buying an HDB flat, whether new or resale, HDB requires the buyer to get prior loan approval either from HDB (if the buyer qualifies for HDB concessionary rate loan) or from a bank/finance company (if a person does not qualify for an HDB concessionary rate loan).
This new rule is to impart financial prudence and planning to HDB flat buyers.
Dennis Ng
Spokesman
www.HousingLoanSG.com ,
a mortgage consultancy portal
