Shortly before announcing the new mortgage interest rates, HDB also provided information about new rules pertaining to the usage of COF and HDB housing loans. The new rules will put emphasis on whether the remaining lease of the property can cover the potential buyer until they reach the age of 95.
On May 9, 2019, the Singaporean Ministry of National Development and Ministry of Manpower made a joint announcement about these changes that will apply to the purchase of HDB flats, executive condos and private properties.
Current rules state that the amount of CPF a potential buyer intends to use is directly related to the remaining lease on the property. Whenever at least 60 years remain on the lease, the buyer can use the maximum CPF allowed by law to finance the purchase.
Whenever the remainder on the lease fell under the 60-year mark, the buyer was still eligible to use CPF whenever his age and the lease years added up to at least 80.
The change will now have a pronounced effect on younger buyers. They will need to do the math of whether the remaining lease can cover them until they turn 95. Whenever the condition is met, CPF will be available to pay for the flat up to the valuation limit. Whenever the condition isn’t met, the use of CPF will be pro-rated.
For leases that have 20 years remaining or them or lower, CPF will not be available to finance the property purchase. This requirement is lower than the previous one for 30 years remaining on the lease.
Finally, when a CPF member turns 55, they will need to have a property with a remaining lease that covers them until the age of 95 in order to be allowed to withdraw CPF savings into a Basic Retirement Sum.
The use of HDB public housing loans will also be subjected to new terms and conditions.
Whenever the remaining lease on the property can cover the new owner until they reach the age of 95, an HDB housing loan will be available at a loan to value limit (LTV) of 90 per cent. If the condition cannot be met, the LTV limit of up to 90 per cent will be pro-rated on the basis of the extent that the remaining lease can cover the buyer up to the age of 95.
These conditions will now be valid even for HDB properties that have less than 60 years left on the lease.
According to HDB representatives and ministry professionals, these changes are required to account for a longer life expectancy in Singapore. Through the changes, buyers are supposed to enjoy more flexibility when buying a new home and a higher level of protection/security during their senior years.