‘First-Time Buyer’ Loan Programs Can Be Tricky

You may be a first-time home buyer and not even know it. That’s because in the world of real estate, “first time” really means “first time in your lifetime”.

Most programs aimed at helping first-time home buyers define that as someone who hasn’t owned a home ever. That’s the good news. The bad news? Despite all the chatter you hear about special loans for first-timers, the reality is there aren’t a lot of programs to help them out anymore. Many of those that still exist are targeted primarily at low-income buyers. But don’t despair! There are a few things you can do to get your foot in the door of your first home.

For first-timers, the most pressing mortgage questions usually have to do with the down payment. Once you’ve owned a home, in theory anyway, you can use the equity from that purchase to come up with a down payment on your next one. But saving up a 20 percent down payment from scratch can be daunting, especially with rents on the rise.

How is HDB helping first-timers to afford a resale flat?

HDB is committed to helping Singaporeans afford their first home. First-time home buyers can choose to buy a flat directly from HDB at a subsidised rate, or a resale flat from the open market with the help of housing grants.

Generous subsidies and grants provided by the Government further ensure that ownership of an HDB flat remains affordable and continues to be within reach of home buyers. 90 percent of first-time home buyers buy their flats directly from HDB at a subsidised rate. These flats are priced below their market value so that buyers enjoy a generous subsidy. First-time buyers of a resale flat will be given a $50,000 CPF Housing Grant for a 4-Room or smaller resale flat and $40,000 CPF Housing Grant for a 5-Room or larger resale flat. Those who plan to live with or near their parents/ married child can also apply for the Proximity Housing Grant of up to $30,000.

Grants for Resale Flats

First-time home buyers who prefer a resale flat can enjoy up to $120,000 in housing grants, depending on their household income and type of flat they buy. This comprises:

  • Enhanced CPF Housing Grant of up to $50,000 families and $25,000 for singles.
  • Additional CPF Housing Grant (AHG)  for eligible lower and middle-income first-timers. This is given on top of the CPF Housing Grant. Depending on their income, the AHG can be up to $40,000 for families, and up to $20,000 for singles.
  • Proximity Housing Grant (PHG) for those who wish to buy a resale flat to live with or near their parents or married child for mutual care and support. Eligible families will receive a PHG of up to $30,000, while eligible singles will enjoy a PHG of up to $15,000.

One of the few options still available exclusively to first-time home buyers is the ability to take a penalty-free withdrawal from an CPF to make a down payment.

All CPF members who are eligible to buy a private property are eligible to use their CPF savings under PPS.
You are not eligible if:

  • you are buying a private property with a remaining lease of less than 30 years;
  • you are buying a private property with a remaining lease of less than 60 but at least 30 years and your age plus the remaining lease of the private property is less than 80 years;

To help you set aside CPF savings for your retirement years, there are housing limits on the amount of CPF savings you can use to buy a private property.

Valuation Limit (VL) is the purchase price or the value of the private property at the time of purchase, whichever is lower.
Withdrawal Limit (WL) is 120% of the VL. This is the maximum amount of CPF you can use for the private property.

To continue using your CPF beyond VL, up to WL, you need to meet the following requirements:

  • Below 55 years old: To set aside the current Basic Retirement Sum (BRS) in your Special Account (SA), including the amount withdrawn for investment, and Ordinary Account (OA).
  • 55 years old and above: To meet the BRS in your Retirement Account (RA), SA (including the amount withdrawn for investment) and OA.

The amount of CPF you can use is lower if you are buying a private property with a remaining lease of less than 60 years but at least 30 years. Read more on buying a private property with a remaining lease of less than 60 years.

Try the Property with Less Than 60 Years Lease Calculator to find out the amount you can use for such properties.

Using your CPF Ordinary Account (OA) savings to finance your private property is an alternative to using cash. However, you should not use all your CPF OA savings to finance your private property. CPF is essentially for your retirement. The more you use for property, the less you may have for retirement.

Do keep in mind:

  • the other items you are servicing with your CPF OA savings, such as your children’s local tertiary education and insurance premiums; and
  • the reduced CPF contribution rates as you age.