The housing market in Singapore has seen an upward trend, making it an opportune time for individuals to own a property. However, financing the down payment for a new property can be challenging, especially if you are still waiting for the sale of your existing property to go through. This is where a bridging loan can be a valuable financing option. In this blog post, we will provide you with everything you need to know about HDB bridging loans in Singapore.
What is a Bridging Loan?
A bridging loan is a short-term financing option that allows new property buyers to cover the down payment costs while waiting for the sale of their existing property. It is especially useful when your CPF funds are tied up in the property you are yet to sell, and you require quick funds for the purchase of your new house.
Types of Bridging Loans in Singapore:
- Simultaneous Repayment Bridging Loan: With this type of bridging loan, you are required to make monthly loan repayments for both your existing home loan and the bridging loan simultaneously. This option can be financially taxing, and it’s important to complete the sale of your listed property within six months to one year to use the net sales proceeds and CPF funds for loan repayment.
- Capitalised Interest Bridging Loan: This type of bridging loan allows you to defer loan repayment until your previous home is sold. The interest is capitalized, meaning it is added to the loan amount, and you start making repayments once the sale of your old property is completed. This option is suitable for those who do not wish to make simultaneous loan repayments.
Pros of a Bridging Loan:
– Accessible from both banks and licensed moneylenders.
– Available to individuals with no credit scores, as licensed moneylender bridging loans consider your ability to pay rather than just your credit score.
– Quick processing compared to traditional home and property loans.
– Ability to use CPF funds for loan repayment.
Cons of a Bridging Loan:
– Banks may require collateral, and failure to repay the loan can result in the seizure and auctioning of the collateral.
– Higher interest rates and shorter loan tenure compared to home loans.
– Bridging loans typically provide enough cash to cover the down payment only, not the full property purchase price.
How Much Is the HDB Down Payment?
The down payment for an HDB property in Singapore is set at a percentage of the property value. It consists of a 5% cash deposit and a 20% CPF deposit. For example, if you are purchasing a $1 million HDB property, you would need to pay $50,000 in cash as the first down payment and $200,000 (20% of the price) as the second down payment in cash or CPF funds. A bridging loan can be used to finance the second down payment if you do not have sufficient funds.
Bridging Loan Vs Traditional Loans:
It’s important to differentiate between HDB bridging loans and HDB house loans. While HDB does not offer bridging loans, it does provide HDB house loans for second-time buyers within the HDB scheme. The following are some key differences between bridging loans, bank loans, and HDB housing loans:
Top Bridging Loans in Singapore:
– Maybank HDB Home Loan: Offers an interest rate of 1.4% to 1.6% for at least six months on HDB properties.
– DBS Bridging Loan: Provides a prime rate interest rate for up to six months on all property types.
– Standard Chartered’s HDB Bridging Loan: Offers an interest rate of 3 months SIBOR + 2.00% p.a. forsix months on HDB properties.
– UOB HDB Home Loan: Provides an interest rate of 4% to 5% for at least six months on HDB properties.
– OCBC Home Loan: Offers an interest rate of 1.55% p.a. for up to six months on all property types.
– Moneylenders Bridging Loan: Interest rates range from 1% to 4% per month, with a loan tenure of one month or until the property is sold, available for all property types.
How to Qualify for a Bridging Loan:
Eligibility and requirements for a bridging loan vary depending on whether you choose a bank or a licensed moneylender. Here are some general eligibility criteria and requirements for both options:
Eligibility & Requirements for Bank Loan:
– Singapore citizen, permanent resident, or foreigner residing in Singapore.
– 21 years of age or older.
– Documents showing ownership of the property you are selling.
– High credit score.
– Documents proving employment, income, and residence.
Eligibility & Requirements for Moneylender Bridging Loan:
– 21 years of age or older.
– Singapore citizen, permanent resident, or foreigner residing in Singapore.
– Exercise Option To Purchase (OTP).
– Monthly income above $1,500 for citizens or $2,000 for foreigners or permanent residents.
– Documents proving employment, income, and residence.
A bridging loan can be a helpful financing option when you need quick funds to cover the down payment for a new property while waiting for the sale of your existing property. They are offered by banks and licensed moneylenders in Singapore, and each option has its own set of advantages and considerations. Consider reaching out to licensed moneylenders like Bugis Credit for lenient eligibility requirements and faster loan processing. Contact us today for a quotation on your bridging loan or other loan types we offer.
Disclaimer: The information provided in this blog post is for informational purposes only and does not constitute financial advice. It is important to conduct thorough research and consult with financial professionals before making any financial decisions.
