HDB recently introduced a new CPF Housing Grant format for resale HDB flats, which will help make resale options more affordable.

Exactly how affordable, though? We’ve done the math, so you don’t have to:

## How much must you *really* earn?

A couple hundreds of thousands sounds like a lot of money because you’re looking at it as a lump sum, but in reality, there are different components to paying for your HDB flat:

- Down payment (as little as 10%)
- CPF Housing Grants (up to $160k!)
- Monthly instalments (remaining price of the HDB flat)

*Note: We based our calculations on resale HDB flats – typically believed to be more expensive than BTO flats. Because challenge accepted.*

So let’s break it down:

### How much must you pay upfront as down payment?

The minimum down payment to be made on your HDB flat depends on whether you’re taking up a HDB loan or a bank loan.

If you’re taking up a HDB loan, you can borrow up to 90% of the HDB flat’s value. The remaining** 10%** has to be paid upfront as down payment, in cash and/or CPF.

If you’ve got enough savings in your CPF to pay for the entire down payment, it’s possible to buy a HDB flat without forking out a single cent in cash.

**Tip:** Note that there’s a monthly household income limit of $12,000 for couples, or $6,000 for singles, for applying for a HDB loan.

*See the complete list of eligibility conditions (citizenship, etc) here.*

If you’re taking up a bank loan, you can only borrow up to 75% of the HDB flat’s value. The remaining **25%** has to be paid upfront as down payment, out of which at least 5% must be paid in cash.

Assuming the HDB flat costs $450,000, with a HDB loan, there’s 10% of $450,000 = **$45,000** to be paid as down payment in cash and/or CPF.

With a bank loan, a minimum of 25% down payment works out to be **$112,500**. 5% of the cost of the flat = $22,500 must be paid in cash, while the remaining 20%, which is $90,000, can be paid in cash and/or CPF.

*(Gawks)* That’s *a lot* more money you’re going to have to fork out at one go.

### What about the rest of the cost?

A further portion of the cost of your HDB flat can be offset with CPF housing grants, which offers you up to $160,000.

Check out all of the grants you’re eligible for here.

The rest of the amount will be paid off via either your HDB or bank loan, subject to interest.

Whether you should take up a HDB loan or a bank loan is a whole other point of discussion, but the lower loan limit of bank loans are often the biggest in-your-face deterrent, especially for younger adults, who might not have enough savings for a hefty down payment.

**Tip:** When planning your home-buying journey, don’t forget other costs such as renovation, furniture and other big ticket items.

### Taking up a home loan

The loan amount you secure, as well as your repayment period, might be limited by your Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR).

The MSR and TDSR limit the amount you can use to repay your loans, based on your gross monthly income:

- The MSR states that only 30% of your income can be used to – you guessed it – service your mortgage.
- The TDSR states that only 60% of your income can be used to repay all of your loans. This includes not only your mortgage, but also any car loan, credit card debts and other personal loans.

You might find yourself limited by the MSR or TDSR for a number of reasons:

**1. Your income**

Say, you’re earning $4,000 a month.

Assuming your mortgage is the only loan you’re taking up (i.e. the TDSR doesn’t apply), you can only take a home loan with a monthly instalment of 30% of $4,000 = $1,200, limited by the MSR.

**2. ****If you’ve got other loans to repay**

Based on the MSR, a $4,000 earner is eligible for a home loan with a monthly instalment of $1,200.

Got other loans to repay? Take account of the TDSR, which limits your total monthly debt repayments to 60% of $4,000 = $2,400.

Say you already have existing monthly debt repayments of $2,000 (yikes). This means you’re only eligible to take up a home loan of $2,400 – $2,000 = $400, instead of the MSR-capped $1,200.

**3. If you’re self-employed**

The freelance life might the envy of many office zombies, but probably less so when we’re talking about loans.

For variable and rental income, only 70% of this total assessed income is counted towards the TDSR, essentially putting a tighter cap on your monthly loan repayments.

**Tip:** “Variable income” applies to freelance income as well as the commission portion of any fixed salaried employee such as salespersons.

For instance, if you earn an average of $4,000 a month as a freelancer, only 70% of $4,000 = $2,800 counts towards your TDSR, which will work out to be 60% of $2,800 = $1,680.

If, for example, you have existing monthly debt repayments of $1,000, you’re only eligible to take a home loan with a monthly instalment of $1,680 – $1,000 = $680.

**4. If you’ve got a bad credit score**

MSR, TDSR and loan limits aside, if you’ve somehow accumulated a bad credit score (yikes again), HDB or the bank might only grant you a smaller loan.

The remaining cost of the HDB flat that’s not covered by this loan will have to be paid upfront as down payment.

To improve your credit score, pay your debts punctually and close off any unused credit accounts at least one year prior to your home loan application.

**How this affects your loan limit**

What this means? The lesser the loan you’re able to repay each month, the longer you’ll take to clear your debt.

The kicker: Loans often have a maximum tenure (i.e. repayment period). This is capped at 25 years (or until you’re 65 years old, whichever is shorter) for HDB loans, and typically 25-30 years for bank loans.

Let’s say you’re servicing your mortgage with $1,000 a month. This means the maximum HDB loan you’re eligible for is $1,000 x 12 x 25 = $300,000, even if that’s less than 90% of the value of your HDB flat.

### Useful tools

HDB has e-services that can help you to work out your financial plans when buying a HDB flat:

1. The Enquiry on Loan Estimate e-service gives you an estimated loan amount you may obtain if you take up a HDB loan.

Simply fill in details such as your employment record, monthly salary, and existing financial commitments.

Based on the information you provided, you can get an estimated loan amount, as well as estimated monthly instalment based on the current interest rate and a repayment period of 25 years:

2. You would never have guessed, but the Enquiry on Monthly Instalments e-service lets you enquire on monthly instalments.

This tool lets you fill in your intended loan amount and repayment period, and gives you an estimated monthly instalment based on the current interest rate.

3. Various banks also have home loan calculators to calculate the estimated loan amount and monthly payments needed:

4. Also, not a tool, but remember other recurring costs that come with homeownership, such as insurance, property tax, and utility fees.

### Your salary vs the cost of your HDB flat

So, back to the big question: How much must you earn in order to afford a HDB flat in Singapore?

Once you’ve gotten over the big hurdle of footing the down payment, how much you need to earn depends on the loan amount that you can repay each month (i.e. How much home loan are you eligible to take up?) and the amount you need to repay each month (i.e. Is this a manageable expense to commit to?).

You’ll see that it’s actually a very attainable number, even if you opt for a resale HDB flat – which is conventionally thought to be less affordable than BTO flats.

### Ok, so here are the numbers…

That was some heavy (but useful, you’ve got to admit) stuff to tread through.

Anyway, here’s how we calculated your required salary to afford a HDB flat (i.e. be able to repay your home loan after footing the down payment):

1. To determine the price point of HDB flats of each size and location, we referenced the latest median resale HDB prices (Q3 of 2019).

*e.g. the median price of a 4-roomer in Ang Mo Kio is $408,000*

2. After paying a minimal down payment of 10% of the price of your HDB flat, you’re left with 90% of the cost to foot.

*$408,000 x 90% = $367,200*

3. For couples and families, there’s up to $160,000 in resale HDB grants up for grabs, but we’ll give it a modest estimate: let’s say you qualify for $80,000 in grants.

*So, you’re left with $367,200 – $80,000 = $287,200 which has to be paid via a loan*

4. Assuming you take up a HDB loan for this amount, at the existing interest rate of 2.6% per annum and with a loan tenure of 25 years.

*Taking into account the interest rate, you’ll have to pay off a total of $287,200 x 102.6% = $294,667**Which works out to monthly repayments of $294,667 ÷ 25 ÷ 12 = $982*

5. To fulfill the MSR, this cannot exceed 30% of your gross monthly income.

*So, to qualify for this loan, you’ll have to be earning at least $982 ÷ 30% =***$3,273**a month*Remember we’re calculating this amount based on a couple buying a HDB flat, which means this digit is the combined income of TWO people.*

## Affordable HDB flats in Singapore

A $400+k flat is actually a realistic option for a household earning just over $3,000 a month?! Surprised us too.

Compare this to half a year ago, when we did the same calculations for a similar Ang Mo Kio 4-roomer – our final figure was $3,847, a whole $500+ more.

Pro tip: Browse HDBs for sale and filter them according to your budget on Carousell. You can thank us later!

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