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Old 24-09-2003, 11:50 AM   #49
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Post HDB revised policy!!

Fm ST, 24 Sept 2003

Housing Board to screen low-income flat buyers

Those intending to take up special loan schemes have to prove that their purchase won't overstretch their means

By Tan Hui Yee

WOULD-BE home owners who want to take advantage of special schemes for low-income families to buy Housing Board flats will have their means checked to make sure they will not be overstretched.

In general, the HDB wants to make sure the monthly instalment does not exceed 40 per cent of a household's monthly income. The loans are at a special rate of 2.6 per cent a year.

The credit checks that start next month are necessary to encourage 'financial prudence', the HDB said. It will also trim the sums they can borrow.

Until now, it has not run such creditworthiness checks on low-income families - those with gross monthly incomes of $2,000 and below - who buy flats from the HDB under special housing schemes. They can get loans for the full amount if they have no savings in their CPF Ordinary Accounts. This practice is being changed.

The HDB said yesterday that it was government policy to help people with low incomes to own homes.

But increasingly, some buyers find it hard to service loans, and the special terms granted are being called into question.

Said the boss of property agency Propnex, Mr Mohamed Ismail: 'In the past, an 80-year-old guy earning $10 a month could still get a $100,000 loan to buy an HDB flat. Which rational institution would finance such a person?'

With the change, buyers will have to show that the household earns at least 2 1/2 times the monthly repayments. Loans must be paid off by the time the youngest of the buyers is 65, or within 30 years, whichever comes first.

For four-room or smaller flats, the loan cap is 90 per cent of the value or selling price, whichever is lower. But the buyers must first exhaust their Ordinary Account CPF savings. For five-room or executive flats, the loan is capped at 80 per cent of the value or selling price, whichever is lower.

Jalan Besar GRC MP Lily Neo said the changes may actually help low-income buyers choose a flat they can afford.

For Mr Ravichandran, 43, a contract painter, and his wife, who live in a rented one-room flat, it may mean a lot of rethinking. The three-room Toa Payoh flat they want may cost $160,000 to $200,000 in the resale market.

He earns $400 a month and has about $20,000 in his CPF account, but no other savings. Under the new rules, he cannot hope to buy even a third of his dream flat.
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