Why you should use Bank Loan instead of HDB loan.

In this new podcast series for 2018, The Straits Times and The Business Times offer tips for the newcomer to the financial investment scene.

Can first-time HDB home buyers take a bank loan? What are the differences between opting for a bank loan or a HDB loan?

What about couples in their late 40s or 50s thinking of buying a second property for investment options? What are the considerations to factor in? What are the trends for such couples in Singapore?

Use of CPF savings

If you take an HDB housing loan to buy or take over an ownership of a flat, you will have to use all the savings in your CPF Ordinary Account for the purchase or takeover before an HDB housing loan is granted for the remaining amount. This is subject to the CPF withdrawal limits for properties with a remaining lease of less than 60 years.

If you choose to, you can first set aside the amount required to pay stamp, registration, and conveyancing fees and premium for the CPF Home Protection Insurance (if applicable), before using all of the remaining available savings.

Your CPF Ordinary Account savings can be used to pay up to 100% of the Valuation Limit (VL) of the flat. The VL is the purchase price or value of the flat at the time of purchase, whichever is lower. Should you still have an outstanding loan amount when your withdrawals have reached the VL, you may only use the savings in your CPF Ordinary Account to pay for your flat if you have set aside the prevailing CPF Minimum Sum cash component .