Most of us know that we’re only allowed one HDB at a time, but did you know you are only allowed to have a maximum of 2 HDB loans? But what if you need another? What are your options, and is a 3rd HDB loan possible?
Well, there is a special scenario where you may be able to get a 3rd HDB home loan. In 2020 alone, there were 6,000 appeals for a 3rd HDB loan submitted to HDB. This 3rd HDB loan is an appeal-based process that takes place on a case-by-case basis.
In this article, we’ll dive deeper into what this 3rd HDB home loan entails and what you can do if you don’t succeed the next time around.
Why might I need a 3rd HDB home loan in Singapore?
The great thing about an HDB loan is that they come at a concessionary interest rate of 2.6%.
Typically, this is dependent on credit assessments and any prevailing mortgage loan criteria. If you want another loan after you’ve taken 2 home loans with HDB, you’ll usually have to look at private financing from financial institutions, like taking up a bank loan.
While bank loans are a good option, there might be many reasons why you need a 3rd HDB loan, some of which might be personal. For example, you may need to move to another HDB home for reasons such as divorce, work, financial struggles, wanting to live with your loved ones, or other personal reasons. Your bank might have also turned you down if you sought a bank loan, based on the bank’s evaluation criteria, such as having a low credit score.
You may also have been turned down by your bank if you sought a bank loan, based on the bank’s evaluation criteria such as having a low credit score.
One other reason you might need an HDB loan is if your age isn’t appropriate for you to serve a full loan tenure, and you may not have someone eligible to partake with you as a joint borrower.
A mortgage broker in Singapore can help you assess your eligibility for a loan from financial institutions for your 3rd home loan, depending on your financial situation, no matter how unique it may be.
Read: A mortgage broker’s advice on how to budget and save for your dream home in Singapore
What should I do if I need a 3rd HDB home loan in Singapore?
If you need a 3rd HDB home loan, you can begin an appeal process from HDB. Don’t set your hopes too high though, 3rd HDB loans are usually only granted under exceptional circumstances. Here’s how you can go about making your case.
You’ll need an appeal letter. You can either draft this by yourself or hire an agent to prepare one for you. An agent might be more familiar with the process and understand the elements that need to be in your letter to increase your odds of the appeal getting approved.
While there’s no template for a 3rd home loan appeal letter, you should include the following elements. First, make sure to explain what makes your situation different or extenuating. This will help HDB understand precisely what you’re going through and aid in their consideration of picking you for a 3rd HDB housing loan.
There are two main reasons why HDB might grant you a 3rd housing loan – one is that you may already have exhausted your housing options, and the other is that your situation may call for an urgent need for housing.
So when you draft your 3rd HDB home loan appeal letter, you might want to make sure you mention those reasons. Moreover, remember not to assume that HDB is aware of your situation when you write your letter.
When you’re ready to submit your appeal letter, you can do so by going to an HDB branch office or applying online on the My HDBPage.
What if I can’t get a 3rd HDB home loan in Singapore? What else can I do?
If your grant doesn’t get approved, don’t let it affect you too much. Instead, stay positive and focus on the next steps that you can take.
Your appeal may have been rejected because your circumstances were not perceived to be urgent enough or because you may have been considered a risk to loan to.
And in the meantime, you might also consider working on improving your credit score to be eligible for more bank loans in the future, whether it’s for housing or something else.
1. Don’t move yet
If you can, delay the process of moving into a new home for now. You can also consider renting a home, which you might be able to afford better than buying a new home in the short term.
If you’re looking to improve your credit score, renting might also give you some good downtime to improve your bank loan eligibility. You can also use the time to pay for the downpayment that a loan might require.
2. Consider trying for a bank loan again, but this time, a little differently
You could try reaching out to more financial institutions to get a bank loan. For example, a mortgage broker in Singapore might be able to help you understand how to better prepare your financial portfolio for banks. You must make sure your renewed attempts are more effective.
A mortgage broker can even help you apply for mortgages with a holistic understanding of all of the options available to homeowners in Singapore looking for a loan for their 3rd HDB home.
And if you decide to try again on your own, the best way to do it is by improving your credit rating and saving up for a down payment amount.
Applying for a loan too many times can also affect your credit score. So if you’re applying for a bank loan again, make sure you’re going in with an improved position.
3. Look for a joint borrower
Having a joint borrower can increase your chances of the loan getting approved because financial institutions may see the situation as a less risky one. That also means that the joint borrower may play in helping pay the loan off.
Banks will combine yours’ and your joint borrower’s age and income to calculate a weighted average, with a formula as such.
Let’s assume you’re a 60-year-old with a S$5,000 monthly income and that your 25-year-old son, who is your joint borrower, is earning S$7,000 a month.
|Person||Age||Monthly Income||Weighted Average|
|You||60||$5,000||Formula: [(Your Age x Your Gross Monthly Income) ÷ (Your Gross Monthly Income + Joint Borrower’s Gross Monthly Income)] + [(Joint Borrower’s Age x Joint Borrower’s Gross Monthly Income) ÷ (Your Gross Monthly Income + Joint Borrower’s Gross Monthly Income)]|
Weighted Average: [(60*$5,000) ÷ ($5,000 + $7,000)] + [(25*$7,000) ÷ ($5,000 + $7,000)] = 25 + 15.75= 40.75 (Round up to the nearest age, 41)
This means that the bank might consider 41 years as the borrower’s income weighted average age, which means you might get a higher LTV ratio! You might even be eligible for a longer loan tenure as long as your joint borrower’s financial situation meets the bank’s criteria.
Learn more about home loan jargon like the Loan-to-Valuation ratio here.
You should make sure to get a joint borrower that you trust because their name has to be on the title of the property you’re buying as well. Yep, this means they’ll be co-owning the property with you. Also, ensure that you and your joint borrower are purchasing the HDB under one of the HDB schemes available.
Need help effectively getting your 3rd HDB home loan in Singapore?
Trying to get a loan for your 3rd HDB home and getting rejected can be an excruciating process, especially if you’re in extenuating circumstances that see you need to move out of your current home and buy a new home immediately.
At FinanceGuru, we understand how difficult and pressing your situation can be, and we’re willing to help you build a strong case.
We can also help you better understand the process and give you our predictions on how the application might go for you currently and any preparations you might need to make.