Ensuring Prospective HDB Flat Buyers Can Afford Necessary Payments Before Processing Sale
Ministry of National DevelopmentSpeakers
Summary
This question concerns the requirements for HDB flat buyers to secure loan approvals before booking and the measures taken to ensure they can afford their financial commitments. Mr Gerald Giam Yean Song inquired about the number of buyers booking without prior loan eligibility and the methods used to verify their financial capacity before processing sales. Minister for National Development Desmond Lee responded that HDB loan applicants must generally have a valid eligibility letter before booking a new flat or obtaining an Option to Purchase for a resale flat. He noted that since 2016, over 70% of HDB loan buyers secured this letter before booking, while those using bank loans must obtain a Letter of Offer before signing lease agreements. HDB further ensures affordability through financial counseling and by requiring buyers to sign a formal financial plan during the booking process to acknowledge their long-term commitments.
Transcript
48 Mr Gerald Giam Yean Song asked the Minister for National Development (a) whether HDB requires flat buyers to obtain an HDB Loan Eligibility (HLE) letter or an approved bank loan before booking a new flat, obtaining an option-to-purchase to buy a resale flat or placing the downpayment for a flat; (b) in each year since 2016, how many flat buyers have booked a flat before obtaining an HLE letter or approved bank loan; and (c) how does HDB ensure that prospective flat buyers are able to afford the necessary payments for the flat before processing the sale.
Mr Desmond Lee: Buying a home is a major financial commitment. To help home seekers plan their finances for their flat purchase, those taking an HDB housing loan will need to have a valid HDB Loan Eligibility (HLE) letter before they book a new flat or obtain an Option to Purchase (OTP) from a resale flat seller. Those taking a housing loan from the financial institutions (FIs) regulated by MAS are required to obtain a Letter of Offer from the FIs before they sign the Agreement for Lease for their booked flat, or before they exercise the OTP for a resale flat.
Since 2016, on average, more than seven in 10 new flat buyers who planned to finance their flat purchase with an HDB housing loan obtained an HLE letter before booking a flat. Those who were not able to do so due to extenuating reasons, such as needing more time to obtain supporting documents, were required to obtain an HLE letter before they signed the Agreement for Lease and made the down payment.
HDB advises home seekers through various avenues to exercise financial prudence and buy a flat that is within their budget. For buyers who require further guidance, HDB conducts financial counselling to advise and work out their budgets based on the estimated HDB housing loan amount available to them. HDB also works in partnership with tertiary institutions and other agencies to reach out to prospective buyers and provide them with information to guide their housing and financing decisions.
When flat buyers book a flat, HDB officers go through a financial plan with them and explain the required payments for the flat purchase. Flat buyers sign on the financial plan to acknowledge the commitment that they have made. This further ensures that they are fully aware of the financial commitments for the flat purchase.