How is owning HDB flat as first house helps your finances

1:27 PM

HDB has been the most popular type of residential property in Singapore, more than 80% of the Singapore population live in HDB flats. Besides, HDB is committed to helping young Singaporeans in affording their first home whether it’s a new BTO HDB at a subsidized rate or popular resale HDB flat in open market with the help of housing grants. With such generous lending hand from Singapore government, it’s a rare scene to see any unsold HDB units around the estate. It is a first step towards building a financial prudent life apart from buying HDB flat as your first home.

Rent vs Own
Even in your own home country, is it better to rent or own to stay in HDB unit? We believe it is better to own the property instead of renting from it. Most of the time, you are helping the owner or landlord to own their property, simply cause we paid for their property to strengthen their financial capabilities. For example, the monthly mortgage is $2,000 and while you are renting it at $2,000, you’re paying for your landlord’s fund to buy the property. Let’s switch places in this scenario, it would be more ideal if you are the one that’s paying the ‘rent’ for yourself. The ‘rental’ that you’re paying on monthly basis is for your own resale HDB unit which is more worthwhile in the long run.

Government grant and subsidies
Housing Development Board has been aiding the young buyers or first home buyers to own their first property or house whether it is BTO flat or a resale HDB. Grants provided by the Singapore government allows them to enjoy up to $120,000 housing grants, depending on their household income and type of flats they wish to buy. There are various types of government grants or subsidies like Proximity Housing Grant (PHG) for those who wish to buy resale HDB flat to live with or near parents or family, which is quite popular among younger generation these days. Buyers who fit the eligibility like families will receive grant up to $30,000 or single individuals who is eligible and enjoy up to $15,000. Good thing about the grants are meant to help you reduce your burden by reducing the cost of the flat you are buying.

Easy property upgrades
Singaporeans are given benefits to upgrade their residential place from government housing to private property. It is regulated by the government in a way that you can own both private properties and a HDB flat first and then a private property after five years of minimum occupancy period (MOP). Most of Singapore young homeowners would choose to buy HDB flat first and stay for five years. When their finance capability allows, they are allowed to upgrade their property to private property like condominium. There are some vice versa instances where the homeowners may opt to buy private residential property and then subsequently to buy HDB flats. The regulations for this would require the buyer to sell their private property within 6-month period and reside in HDB for five years.

Bank loan vs HDB loan
Choosing financing for your homes can be very tricky as there are many loans out there offered by different financial institutions. If you’re buying HDB regardless resale or BTO, HDB loans are available for Singaporeans and the eligibility is usually stricter compared to bank loans. However, HDB loans are less likely financial burdening compared to bank loans in the long run. Downpayment for HDB loans can be paid 10% fully using CPF (Central Provident Fund) but for bank loans you’re required to pay 5% in cash and 20% in cash or CPF. Loan to Value limit (LTV) for HDB loan is higher than bank loans which is at 75%. Although interest rates for HDB loan is higher than bank loan but repayment for HDB loan is consistent compared to bank loans because the interest rates varied which only valid for 2 to 3 years. HDB loans is less intrusive and hurtful to your cash flow as the rates are fixed. Hence, if your budget is tight, HDB loans are the ones that will help you through with your finances.

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