Young couples voice concerns over housing loan limits under new HDB protocols

Uncertainty is mounting over reassessments for loan amounts and grant clawbacks

Mar 13, 2024

FIRST-TIME homebuyers are raising questions over a lack of clarity in government policy on assessments for housing loans and grants given by the Housing and Development Board (HDB).

In chat groups on social media channels such as Telegram, posts show several young couples caught in a bind over the amount of financing they now qualify for. This comes on the back of a change in when HDB assesses flat applicants’ incomes for loans and grants.

Some are concerned that their HDB housing loan amounts will be assessed based on the new HDB Flat Eligibility (HFE) letters, with no reassessments possible in the future.

This would be especially challenging for couples who apply to buy a flat while one party is in school and the other is employed full-time.

Under the previous HDB Loan Eligibility (HLE) letter scheme, such couples were able to apply for reassessments after both parties had entered the workforce, to raise their HDB housing loan quantum eligibility.

Nanyang Technological University (NTU) undergraduate Charlotte Seah, 22, said: “We are kind of stuck in a situation where you know you have to wait several years for a flat, so you want to apply for it as soon as possible. But right now… it’s quite hard to finance the flat if this is the fixed amount of loan we’re getting.”

No do-overs

In a post that has been forwarded multiple times around various Telegram chat groups, one user said students at an HDB question-and-answer session at the Singapore University of Technology and Design were told that, after they apply for their HFE Letter, their household incomes could not be reassessed to raise the HDB housing loan quantum they qualify for.

The reason given for this was that couples could take advantage of the system and apply for a higher Enhanced Housing Grant (EHG) when they have lower income, being the time when they apply for a flat. Such couples could then, closer to the date of key collection, apply for a higher loan amount with a higher income.

In another e-mail received by a different couple, HDB said it would not be able to reassess their income for a bigger HDB housing loan amount, even if there were an improvement in their household income.

“We seek your understanding that applicants’ eligibility for an HDB housing loan, as well as the credit assessment to determine the maximum loan amount, is based on their financial position at the time of their HFE letter application,” said HDB.

“This is stated in the terms and conditions for an HFE letter, with the intent to maintain a clear and consistent position on the eligibility conditions, as good stewards of public funds and to be fair to all applicants.”

Couples where both parties are full-time students or national servicemen, or where both parties completed studies or national service within 12 months before applying for a flat, would typically qualify for a deferred income assessment.

Under this scheme, a couple booking an uncompleted flat can have their assessment done about three months before their new home is completed.

However, couples where at least one party has been working for 12 months or more would not be able to take advantage of the scheme. Without a reassessment, such couples would qualify for a smaller loan than if both their incomes were to be considered at a later stage.

While couples can apply for a bank loan closer to the key collection date for their flat, the loan-to-value ratio for bank loans is lower, at 75 per cent, compared to that for HDB housing loans, at 80 per cent.

Furthermore, bank loans currently carry a higher interest rate than HDB’s concessionary 2.6 per cent rate. The three-month Singapore Overnight Rate Average stood at 3.648 per cent as at Mar 1, 2024.

‘We can’t promise you anything’

Seah said she is concerned about how she will pay for her flat purchase with a smaller loan.

She applied for a flat in Bukit Merah in the December 2023 Build-To-Order (BTO) sales launch with her partner, who is 24 and has held a full-time job for more than 12 months. Because their loan was determined based on one partner’s income, they qualified for much lower financing than they had planned for.

Seah said she would like to be able to take on a larger loan when she joins the workforce. However, there is conflicting information online about whether HDB will raise the housing loan quantum made available to homeowners after the HFE application stage.

In her calls with HDB officers, she was told that she would be able to get a higher loan with a reassessment closer to key collection, but HDB would then claw back the EHG grant with interest from her CPF account, as the couple’s household income would have risen.

She added that she has not managed to get anything in writing from HDB, and that she hopes the board could create a clearer FAQ site about this.

“They keep telling me on the phone that ‘we can’t promise you anything’ and ‘you have to see in the future’, which is so bizarre to me because this is one of the biggest purchases that we will ever make in our lifetime,” she said. “A lot of us are calling in (and) enquiring about the same thing, which is a waste of man hours and a waste of our time when we’re put on hold.”

In response to The Business Times’ queries, HDB said that it understands that there could be situations where couples may wish to appeal for a higher loan amount at a later point, before they receive their keys, when their combined household income may be higher.

“While this is possible, any reassessment will affect other application parameters as well. For example, both housing loan and grant amounts may change as the household income of the applicant changes,” it said.

Furthermore, HDB clarified that while there is a second credit assessment that is currently conducted two to three months before the key collection date, this is only meant to check if there have been adverse changes to a couple’s circumstances. These adverse changes include bankruptcy or loss of employment.

“The purpose is to ensure that they would still be able to service the monthly instalment of the HDB housing loan amount offered in the HFE letter (subject to the applicable loan-to-value limit), or a lower loan amount arising from adverse changes to their circumstances,” it said.

Another undergraduate, 26-year-old NTU student Mavelus Foo, said he may give up his queue number for a flat in Bukit Merah under the December 2023 BTO exercise.

He had applied for a four-room unit there, which would cost between S$533,000 and S$723,000. The HDB housing loan approved for his application, computed based on his partner’s current income alone, is significantly lower, at S$150,000.

“We applied with the impression that we could (be reassessed), because that’s always been the case for so many years,” he said.

Foo added that he would have liked to have the option to opt for deferred income assessment, but his partner has been working for more than a year, so they do not qualify for the scheme.

He has also been told by HDB officers that, because his queue number puts him far enough in front to get a unit among those available, he will not be able to ballot for any other projects in the meantime.

If he chooses to not book a flat at his given appointment date, he will be considered a second-timer from that date for a year, under new rules to ensure more efficient allocation of homes introduced last March.

‘A bit confused’

Meanwhile, another homebuyer who wanted to be known only as Nicholas said there is some confusion around the current HFE scheme, as it appears to differ from the previous HLE letter. He applied for a BTO flat in Woodlands under the December 2023 sales exercise with an HFE letter.

“My spouse actually has a job (now), and we applied with the understanding that, at a later stage, our loan can be reassessed,” he said. “But after reading through so many different chats… we are also a bit confused. Recently, when we tried to read up about it, we realised that it might not be the case, which created quite a bit of panic and confusion as well.”

Still, he agreed that the housing grant should be clawed back if a couple’s income rises significantly, and they subsequently qualify for a larger housing loan.

“The intent of the grant, ultimately, is to support a household with a lower income and so, if at the point of collection, your economic conditions have actually improved, then the loan and grant amount should reflect your current household income,” he said.

https://www.businesstimes.com.sg/pro...-hdb-protocols