The HDB home loan market is one that financial institutions and banks in general do not ignore, being estimated to be worth $63 Billion. As of 1st of January 2003, the option of getting a home loan from a commercial bank in order to purchase an HDB flat has brought fierce competition between financial institutions. As mortgagee, of course, the bank has a right over the flat, so if the borrower defaults on his payments for some reason, the bank has the right to take and sell the flat in order to recover the amount lent to the borrower. Most banks, though, do not go for such drastic decisions, unless the borrower is completely noncompliant.
So what are the steps you have to go through in order to get a bank loan for an HDB flat?
After you decide on a flat you like and are interested in buying, you must first research the market and choose a bank or a financial institution to take up a loan from. It is recommended that you do that after you settle on a type of interest rate, and also on a benchmark rate for your package to be pegged to. In Singapore there are two daily reference rates: the Singapore Interbank Offered Rate (SIBOR) and the Swap Offer Rate (SOR). These two are set by the Association of Banks in Singapore and follow each other’s trends. For your loan package you can either choose a fixed rate, which offers more stability and less risk, or a floating interest rate, which will follow the trends of SIBOR or SOR.
At the same time, you will need to decide on a lawyer to appoint for the transaction. It is very important to get good references when it comes to lawyers, so if you have a housing agent, you can ask him for suggestions. Before the appointment you must sign a Warrant To Act in the presence of your lawyer. The lawyer must also obtain a confirmation from the Housing and Development Board (HDB) to attest that he is acting for you and the bank. During the first appointment, you will have to submit the lawyer’s letter to the HDB resale officer. After that, it will take about two weeks for HDB to approve the transaction and issue a notification of the approval. During the second appointment, the lawyer will collect the keys from the seller at HDB on your behalf. This entire process is estimated to take up to six-eight weeks.
If what you’re interested in is refinancing, the process is simpler: after you choose the bank you wish to refinance your current loan with, the bank will liaise with the lawyer you appointed. The lawyer will have you sign all the documents that need your signature and carry through with further actions, which will take about six weeks.