HDB Loan, Mortgage Servicing Ratio. Who is eligible and how?

HDB loan image

HDB loan is a financial loan given by Housing & Development Board (HDB) for the purpose of buying HDB properties in Singapore. It is the privilege of every Singapore Citizen or at least one of the owner must be a Singapore Citizen in order to qualify.

Eligibility for HDB Loan

To qualify for HDB loan application, the applicant must fulfill the eligibility set out by HDB on their website. Each applicant is eligible to take a maximum of two HDB concessionary loans in their lifetime. The meaning of HDB concessionary loan means that the interest rate is fixed at 2.6% per annum, which this interest rate hasn’t changed for the past 15 years. Click HERE to find out more about HDB eligibility.

Can I  take up a Third HDB Loan?

There can be an occasion whereby applicant has already taken two HDB loans and require to take a third HDB loan due to their situation. For such cases, HDB charges an interest rate of 3.3% which is a non-concessionary loan interest rate for any applicant that has taken more than two HDB concessionary loan.

What is the Benefit of HDB Loan?

Back in 2006, SIBOR rate from the banks was at a record high of close to 4%. In the current market situation, the interest rate from the bank has dropped to 1.3% in 2015 and has been constantly rising progressively to 1.6%. The HDB loan interest rate has, however, remain constant and isolate from external influence maintaining at 2.6% through all the years. This gives you a good assurance and better forecast of your personal and family spending.


Another reason why home buyers choose HDB loan over bank loan (besides the stable monthly mortgage loan repayment) is that the initial cash down payment is easily affordable as compare to a bank loan. For HDB loan, the applicant can take up to 90% of the property price or valuation price of the property whichever is lower. The remaining 10% can be pay through CPF. This means that the only cash involvement is the option fees of maximum $1,000 and option exercise fee of maximum up to $4,000. Both option fee and option exercise fee cannot exceed a figure more than $5,000.

While there are many mortgage loan calculator on the internet, buyers can actually do their own calculation with ease by understanding the calculation formula below.

Assuming you are buying an HDB flat using the HDB loan and the flat you are buying is $750,000. This will be the breakdown.

Loan Calculation for HDB
Loan Calculation for HDB (1)

Your total cost in buying this flat will be $750,000 + $17,100 + $1,000 + $8,025 = $776,125.00. Of which, $5,000 will be paid in cash for the option fee and option exercise fee. An agent service fee of 8,025 will be payable after the transaction has been completed for the service rendered. Your minimum CPF needed for the transaction will be $75,000 + $17,100 + $1,000 = $93,100. Stamp duty and conveyancing fee can be paid via CPF.

Mortgage Servicing Ratio (MSR)

Here’s the continuation of the calculation. What I had explained earlier is a simple calculation of using HDB loan with a maximum loan to value of 90%. The next consideration is your affordability. Can your income support you in securing the loan of $675,000 in this case?

Using a mortgage calculator you will need to key in the purchase price or valuation whichever is lower. Follow by keying in the interest rate of 2.6% and a max loan tenure of 25 years if you are 40 years old and below.

Loan tenure follows a base number of 65. So if you are 45 years old. You will need to take 65 – 45 = 20 years loan tenure.

With that, this will derive a monthly mortgage repayment of $3,062.00.

The term Mortgage Servicing Ratio (MSR) is a guideline set out by Monetary Association of Singapore (MAS) to curb how the banks lend the money to the homeowner. This is applicable for buying condos in Singapore too. In the past, the cap for MSR was at 40 percent of a borrower’s gross monthly income. In was reduced in January 2013 to 35 percent in view of the Singapore economic condition. In the same period, MAS adjusted the limit to 30 percent for bank-issued loans for HDB flats.

So having the figure of $3,062.00 and MSR of 30%, we can easily calculate the gross income needed to obtain the loan amount of $675,000 will be $3,062.00 / 0.30 = $10,206.00. The buyer will need an estimate of $10,206 or higher to obtain the loan needed for the purchase.

The same calculation can be applied if you want to know how much you can afford to buy. For example, if a buyer is earning a gross income of $5,000. The calculation will be $5,000 x 0.30 = $1,500. And by using the same mortgage calculator to key in the respective field the estimated maximum loan amount the buyer can get is $330,637.

If $330,637 is the 90% of the purchase figure, the total purchase price will be $330,637 / 0.90 = $367,374. And the 10% which will be pay by CPF is $36,737. You can then calculate the figure for stamp duty, conveyancing fee and agent service fee.

Loan Calculation for HDB (2)
Loan Calculation for HDB (2)


Get a Professional Property Buying Consultation

If you need professional consultation in buying or selling your property (HDB or private), you can free to contact me through the enquiry form. I will love to hear from you.

James Yang

Associate Division Director at Huttons Asia Pte Ltd
James identifies the latest property trends to bring the most relevant advice to his clients.
James Yang