Streamlining Home Ownership: A Guide to the Enhanced HDB Staggered Down payment Scheme

Balancing the everyday financial commitments is hard as it is, and with the aftermath of buying a home, it could be really daunting. Especially for young couples stepping into the property market, this journey can get even more stressful. Recognising this, the Housing Development Board (HDB) of Singapore revamped the Staggered Down payment Scheme in 2024, making the initial financial burden of purchasing a flat more manageable for those opting for a Build-To-Order (BTO), Sale of Balance Flats (SBF), or Open Booking of Flats (OBF) unit.

Down-payments can indeed stretch the budget, requiring 20% of the flat's price if financed through an HDB loan and 25% for bank-financed purchases. Such significant sums can pose challenges, especially for couples early in their career paths. 

For property buyers considering the HDB Staggered Down payment Scheme, this blog will help provide the needed information. Even if you are contemplating about paying the BTO down payment for HDB flats, or looking forward to an HDB resale flat, this guide has the required insights.

 

Understanding the HDB Bank Loan and Down

payment

 

Before diving into the specifics of the HDB Staggered Down payment Scheme, it's crucial to grasp what a down payment entails. Simply put, it's the initial amount you need to pay when securing a new HDB flat. This payment is typically made during the signing of the Agreement for Lease, about six months after the flat booking.

Find out how much you need for your HDB down payment and when should you make the down payment for resale HDB

Here’s a breakdown of what you might expect to pay under different financing options, assuming a flat price of $500,000:

New HDB Loans: With an 80% Loan-to-Value (LTV) limit, the loan might cover up to $400,000 (80% of $500,000), leaving a down payment of $100,000 ($500,000 - $400,000). This amount can be covered using your CPF Ordinary Account (OA) savings, cash, or a combination of both.

Currently, the initial down payment under the scheme is 5 or 10 per cent of the flat price, depending on the financing option chosen. In comparison, the down payment for most homebuyers taking an new HDB housing loan is 10 per cent, and 20 per cent for those taking a loan from financial institutions.

Bank Loans: These are slightly more complex, with varying LTV limits and down payment requirements based on the loan tenure and the borrower's age at the end of the tenure. For instance, a typical 75% LTV limit would require a down payment of $125,000 [$500,000 - (75% of $500,000 = $375,000)], while a more stringent 55% LTV setting could push this up to $225,000 [$500,000 - (55% of $500,000 = $275,000)].

For those opting for bank financing, obtaining an In-Principle Approval (IPA) is crucial. In case there is any confusion regarding your HDB bank loan in Singapore, it is best to seek unbiased advice of a trusted financial expert to guide you through this process. Having an IPA plays a key role in your home buying process and this article will explore why it is so.

why getting an in-principle approval home loan is essential and how it benefits you, especially in the competitive housing market of Singapore.we're here to demystify the IPA home loan in Singapore, turning this mythical beast into a friendly guide on your home-buying journey.

How the HDB Staggered Down payment Scheme Works

This scheme is designed to alleviate the upfront financial strain by allowing the down payment to be split into two more manageable instalments. The first is payable upon signing the Agreement for Lease—typically nine months after booking a new flat. The second falls due when you collect the keys to your flat, which could be between two and a half to four years later, depending on construction progress.

Phased Down payment Requirements

Before June 2024: Initially, a 5% down payment was required in cash or CPF OA at the lease signing for those with an HDB loan, with 15% due at key collection. For bank loans with a 75% LTV, a 10% down payment was required initially (with at least 5% in cash), and 15% at key collection.

From June 2024 Sales Exercise: The down payment at the lease signing has been reduced to just 2.5% in cash for both HDB and bank loans, with a subsequent 17.5% to 42.5% due at key collection, varying by the LTV ratio.

Eligibility for the HDB Staggered Down payment Scheme

To qualify for this scheme:

• Couples must be first-timer applicants or include one second-timer.

• They must have booked a new 2-room or larger uncompleted HDB flat.

• A valid HDB Flat Eligibility letter must be obtained by the younger applicant's 30th birthday.

• For those 'right-sizing' to smaller units in non-mature estates, eligibility extends even if the current HDB flat hasn’t been sold.

Other Down payment Assistance for Older Buyers

Individuals aged 55 and above may opt for the Deferred Down payment Scheme (DDS), deferring the entire down payment until key collection, provided they are moving to a smaller flat. This scheme is particularly beneficial for those whose funds are predominantly tied up in their existing property.

Final Thoughts

The HDB’s enhanced Staggered Down payment Scheme provides crucial support for young couples and right-sizers alike, easing the initial financial burden and facilitating smoother transitions into new homes. Whether you're considering a new sale or a resale flat, understanding these financial structures and planning accordingly can make your home-buying journey significantly less stressful. If you're navigating these options, don’t hesitate to reach out for expert advice to ensure you make the best choices for your circumstances.

Need help to finance your latest property purchase? Let the mortgage experts at Dollarback Mortgage Finance help you find the best deals.