HDB’s HLE Scheme and Prudent Planning

l^st Jan 2007 - HDB implemented the Housing Loan Eligibility scheme (HIE) for both direct and secondary market purchases.
All home buyers must ensure that they have the financial ability to make the purchase.
Private property buyers should seek comprehensive housing loan planning assistance prior to any purchase.
Buyers should not make hasty decision to purchase in the hope of making a quick investment return.
It is not only the initial 5% cash deposit that the buyer should be concern with.
Financial institutions today have very thorough and stringent credit approval processes.
Familiarize yourselves with CPF's latest guidelines and policies pertaining to property purchases.

A Prudent Mortgage Plan

Before you start your house hunt, a proper budget must be set and a detailed mortgage calculation done.
Do not clean out your cash and CPF reserves at the initial stage.
You must know the stability of your job and future income.
Sufficient insurance coverage to protect your investment.
CPF Minimum Sum Scheme
Familiarize yourself with the latest housing loan packages.
Good to know:

-monthly cash and CPF repayments
-principal vs interest payments,
-breakeven point to turn over a profit,
-rental returns vs interest payments,
-investment return and yield,
-cash and CPF breakdown,
-cash proceeds,
-and insurance required.

Speak to your existing financier or to an experienced mortgage planner.
Some features to look out for:

-Fixed interest rate
-Variable interest rate
-Blended rates
-Pegged rates
-Interest servicing only
-Linked account
-Loan tenure
-Lock in period
-Claw back
-Progressive payment scheme
-Different payment scheme

-Types of loans offered: housing loan, bridging loan, construction loan, OD and 5th charge term loan

Factors That Financial Institutions Take Into Consideration When Approving A Loan

Monthly income
Monthly CPF contributions
Existing funds in the CPF Ordinary Account
Other existing financial commitments
Employment profile
Age of borrower
Nationality
Debt Servicing Ratio (the ratio of affordable repayment based on gross financial commitments)
Bankruptcy
Credit History
Financial strength of joint borrowers (if any)
Liquidity