More HDB downpayment

HOUSING Board (HDB) flat buyers taking private bank loans for their purchase will now have to fork out more cash for the downpayment on their homes.

The Government has lowered the home loan amount that buyers can borrow from banks from 90 per cent to 80 per cent of the total purchase price.

The new 80 per cent rule, also known as the loan-to-value (LTV) limit, will apply to both private and public flats.

But for those buying HDB flats with HDB loans, the LTV will still remain at 90 per cent.

In a joint statement on Friday, the Ministry of National Development, Ministry of Finance and the Monetary Authority of Singapore said that this is because HDB flats are already subject to other criteria to prevent speculation and encourage financial prudence.

For example, there is a minimum owner occupation period of three to five years and a restriction on ownership to one flat per household.

HDB loans are offered to only eligible first-time flat buyers or second-timers who are upgrading.

Housing analysts said that the new measures would have an impact on the HDB market. Buyers who are not eligible for HDB loans must now fork out a higher downpayment as they can only borrow up to 80 per cent of their home purchase price.

This could depress the amounts of cash upfront paid to the seller above the flat’s valuation, known as cash-over-valuation, since buyers are now less likely to have excess cash.

Source: Straits Times, 19 Feb 2010