Yeah, I know we covered this topic before. But it was before all the big changes we’ve seen, so that old guide’s now as useful as a car manual from the time of The Flintstones. And since some of you have started asking this question again, I thought we’d better do a quick, fresh take:
Key Changes in the Wonderful World of HDB
I know the the editorial team’s frowning at this headline. I refuse to change it.
At the rate our media’s celebrating HDB, we’re months away from opening a “Wonderful World of HDB” theme park. You’ll see: “Sudden Subsidy” roller coasters, shooting out the mouths of politicians’ statues, and cafeterias selling Executive Condiments (EC) burgers.
(I call dibs on the ideas and names).
Now some of the celebrated HDB changes, which should impact your decision to get the biggest flat, are:
- Stepped Up Special Housing Grant
- De-linking of BTO Flats from Resale Flat Prices
- The Joint Singles Scheme
1. Stepped Up Special Housing Grant
The Special Housing Grant (SHG) is a $20,000 grant for HDB flats. This was previously given to lower income families ($2,250 a month and below), to buy 3-room and 2-room flats.
During the National Day Rally speech however, Prime Minister Lee Hsien Loong announced a step-up to the grant. It will now cover 4-room flats as well, and now the Middle Class will qualify. There was a mention of qualifying at a household income of $4,000 or under a month; I’ll update you with the exact figure once I’m sure.
A stepped up SHG might make a 4-room a far more sensible decision than a 3-room. You’ll have the potential for rental income (whether you use it or not), and more room for your family. All without surrendering the $20,000 grant.
2. De-linking of BTO Flats from Resale Flat Prices
Some people out there are still obsessing over capital gains (i.e. they think their flat is an asset, not a home). Which is great justification for certain healthcare ideas. Like subsidised hearing aids.
Your flat is not going to be considered an asset first and home second. I don’t know how much clearer the government can make that message. Hence, new flat prices are now de-linked from resale flat prices.
This is all good news for home buyers; it makes BTO flats more affordable. For them, it’s a sign that they may be able to pick the biggest one. For the investor types, buying the biggest flat no longer translates to the same kind of capital appreciation that it used to.
3. The Joint Singles Scheme
Two single Singapore citizens can now make a joint application for a flat; this is under the Joint Singles Scheme (JSS). The subsidies they both get can be combined. And if they later get married, they get another $15,000 for their flat.
So if you and your partner are mostly sure about settling down, it might not be a bad idea to grab a bigger flat. There’ll be more room for your family, and you know another $15,000 subsidy will be waiting.
Other Related Factors
Some of you will have to use a private bank loan, instead of the HDB concessionary loan. Now don’t be afraid*.
*I mean that literally. Don’t. Like any wild animal, bankers can smell fear, and it sends them into attack mode.
You should, however, be aware that certain macroeconomic factors, and recent government policies, will impact your decision. Those of you intending to use private loans need to consider:
- Increased Difficulty in Refinancing
- Rising Interest Rates
1. Increased Difficulty in Refinancing
Refinancing has become more complicated, with the new Total Debt Servicing Ratio (TDSR) framework.
Remember your finances are evaluated every time you want to switch loan packages. And because the new TDSR factors in every single debt, even credit card bills, there’s now greater risk you’ll be unable to refinance.
So if you want the biggest flat, here’s the question you need to ask: Can you maintain loan repayments, even after the fourth year (that’s usually when your home loan rates shoot up)? Assume you will be unable to change to a cheaper package.
If you’re dependent on switching to cheaper loans, you’re playing chicken with a 16-wheeler. That’s the kind off assumption that later results in a fast, costly sell-off. Think about it before getting, say, a five-room flat or EC.
(PS: If you’re having trouble refinancing right now, try asking the mortgage specialists at SmartLoans.sg. It doesn’t cost you anything!)
2. Rising Interest Rates
This is not a concern with HDB concessionary loans (those home loan rates are fixed at 2.6%).
But interest rates for private bank loans have gone up, with some banks raising the spread by around 0.5% over the past year. American Federal Reserve policies, expected to come soon, might also raise SIBOR and SOR rates. And If I’m speaking Klingon right now, refer to this guide.
In short, if you take a private bank loan, be more careful about the size of the flat. A huge loan quantum can make even small shifts in interest rates quite devastating.
Circumstances vary for each individual. But in general, people using a HDB loan shouldn’t be afraid to grab the largest flat. The drawbacks seem minimal.
But people using a private bank loan have to be careful they’re not over-leveraged. I don’t think these people will be bankrupted by rate hikes; but it can make their lives more deprived…for a long time.
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