Second HDB loans more widely available

SECOND concessionary loans from the Housing Development Board (HDB) – once reserved for the most part for upgraders – will be far more widely available from today.

Homebuyers will also be made to dip into their own pockets first before reaching for a loan, with HDB reducing the amount of the second concessionary loans it grants.

Under changes announced yesterday, buyers who move down to smaller flats or to the same type of flat will find it much easier to get the loan.

In the past, second concessionary loans were granted to downgraders only on a case-by-case basis.

The more liberal policy announced by National Development Minister Mah Bow Tan yesterday will help Singaporeans right-size to a home they can sustain over the long-term, to encourage financial prudence.

Mr Mah added that restricting the loan for upgrading might drive households to upgrade even if it were not a prudent move.

‘With greater economic volatility, the flexibility to right-size will be more important… But I hope residents will take that second loan carefully and cautiously,’ he said.

HDB buyers who have sold private properties will remain ineligible for a second concessionary loan.

Many Members of Parliament have been calling for this change for some years.

The HDB said that the change will benefit families which need to right-size to smaller flats but which lack sufficient proceeds from the sale of their existing flats.

It will also be less generous with the way second concessionary loan amounts are awarded.

The loan will be reduced by a homebuyer’s full CPF balance and part of the cash proceeds from the sale of the first flat in an effort to further ensure financial prudence.

But the household can retain at least half of the cash proceeds, or $25,000 in cash, whichever is greater.

The right-sizing of loan amounts will ensure that flat buyers do not take a larger than necessary concessionary loan, reducing the likelihood of subsequent mortgage arrears, the HDB said.

‘(These changes) will help homebuyers manage their finances for their flat purchase upstream, and avoid financial difficulties downstream,’ Mr Mah added.

PropNex chief executive Mohamed Ismail said the changes would allow homeowners to unlock the capital appreciation of their homes over the past three years and to reorganise their finances.

Source : Straits Times – 6 Mar 2010