How to get another HDB flat (after you’ve lost the first one)

Whether it’s through divorce or missed bank mortgages, you lost the first HDB flat. The good news is that HDB is quite forgiving – once you’ve recovered, you will probably have a chance to own a second one. Here are some of the things you need to know, before trying a second time:

1. If you were previously bankrupt, but have since recovered financially, you might still need to wait a few years

If you were previously declared bankrupt (or declared it yourself) and lost the HDB flat, you may now have recovered. However, you may not be able to obtain a HDB loan right away, and an immediate bank loan is out of the question.

To get a second loan, you must first obtain a Letter of Discharge from bankruptcy. This is issued by the court, once you have met the conditions of your Official Assignee (OA).

For local banks, you will have to wait five years from being issued the Letter of Discharge, before you are eligible for a loan. For foreign banks, you may have to wait up to seven years. Non-banking financial institutions, such as Hong Leong, may grant you a loan as long as you have a Letter of Discharge; but this depends on their credit officer’s assessment of your situation.

For HDB, there is a chance you will not be given a HDB Concessionary loan right after you have been discharged from bankruptcy (it will show on your credit report). However, you can make the request anyway and explain your situation.

2. If you have taken two or more HDB loans previously, you will have to approach the bank

If, for whatever reason, you have already taken two or more HDB concessionary loans, you will not be able to get another one. Any loan to purchase a flat will have to come from the bank instead.

Apart from a different rate*, this means you will be faced with a higher down payment. While HDB loans can finance up to 90 percent of your flat, bank loans can only finance up to 80 percent. Of the remaining 20 percent, up to 15 percent can come from a combination of cash or CPF. The remaining 5 percent must be paid in cash.

For example, if you are buying a $300,000 flat, and you cannot get another HDB loan, you must have up to $45,000 in cash and / or CPF, and an absolute minimum of $15,000 in cash.

In addition to this, you must meet the usual requirements to qualify for a loan (e.g. your monthly repayments must not exceed 60 percent of your monthly income, in combination with your other debt obligations).

(*HDB concessionary loan rates are 2.6 percent per annum and seldom change. Bank loan rates currently average 1.8 percent per annum, but are subject to fluctuations).

3. There is now a Fresh Start Housing Scheme for Second Timers

HDB has a Fresh Start Housing Scheme for second-timers to own a flat again. However, there are certain requirements you need to meet. You must:

• Have stayed in a public rental flat for at least two years
• Not owe more than three months in late rental payments
• Have not received any public rental flat discounts, via schemes such as the Rent & Purchase Scheme
• Be aged between 35 and 55 years
• Have at least one Singapore Citizen in the family nucleus (you or your spouse), and one child who is a Singapore Citizen below 16 years old
• Have been employed for the past 12 months

In addition, you will need a Letter of Social Assessment (LSA) from the Ministry of Social and Family Development (MSF). This is an analysis of your employment situation, family issues, children’s school attendance, and more. Check on the MSF website for more details.

If you qualify under the Fresh Start Housing Scheme, you can buy a short-lease two-room flexi HDB flat. These flats have a 45 to 65 year lease, and a Minimum Occupancy Period of 20 years. You can be given a HDB loan for this purpose, even if you do not normally qualify (subject to assessment by HDB).

4. Have your children step in and help

If your children have grown older and are working, they can now be joint borrowers with you. While you may not qualify to buy a second flat on your own, you may be able to do so with your children’s help.

However, do be aware that your children, once they are joint borrowers with you, cannot buy a second flat of their own. So while this seems like an easy solution, ensure that you’ve all worked out what to do, if your children want to get married and settle down in the near future. Also, you will most likely be living with them.

5. Don’t take loans for up to a year, preceding your attempt to buy your second HDB flat

Pay down (or pay off) your existing debts, and try not to take on any more in the year before applying for your second flat. In particular, do not take a personal loan to cover the down payment of your second HDB flat.

Piling on debt causes you to bust your Debt Servicing Ratio. In addition, making multiple credit inquiries, or opening multiple new credit lines in a short time, will be reflected in your credit report. This makes you look “credit hungry”, and it will impact any assessments that are made by credit officers.

6. Aggressively rebuild your CPF

If you previously used up your CPF to buy a HDB flat, you should focus on aggressively rebuilding it. You may want to consider making voluntary contributions above the usual 20 percent of your pay cheque – check on the CPF website to see how this done.

In addition, being able to point toward two or three years of disciplined savings can weigh significantly in your favour, when your financial situation is assessed.

As the CPF Ordinary Account (OA) has guaranteed interest of up to 3.5 percent per annum, regardless of market conditions, you will be surprised at how quickly you can earn enough for a second flat:

Let’s assume you earn $2,500 per month. Of this amount, you would usually contribute $500 to CPF (and you employer would top up 16 per cent, or $400 per month). But let’s say you tighten your belt, and make a voluntary contribution of an additional $200 a month.

This comes to $1,100 a month in savings, or about 13,200 per year. Assuming you get the lowest CPF OA rate of 2.5 per cent annum, you would have over $70,000 in your CPF OA after five years. This is already double the down payment on a typical four-room BTO HDB flat (around $30,000 to $35,000).

So don’t be put off by the big numbers involved – just by saving a little bit extra each month, you will have your second HDB flat before you know it.