For a lot of Singaporeans – hell for a lot of people around the world – getting their mortgage off early is a common goal. We get it too: Most of us don’t like the thought of owing money, especially for something as important as our home.
The good news for Singaporeans is that unlike Singapore’s private real estate market, HDB homes are affordable for most. But if you want to go further and early retirement, FIRE, etc., here’s what you need to do:
How are the following numbers derived?
In all of the following cases, we have taken full funding from available loans. This is 90 percent of your flat rate if you are using an HDB loan and 75 percent if you are using a bank loan.
We also assumed the apartment was a new 4 bedroom apartment which is the most common choice for first homes among Singaporeans. We will use an assumed cost of $ 320,000 for this apartment (this is a typical amount after subsidies).
Stamp taxes, renovations and furnishings are excluded as these are not covered by the home loan.
For bank loans, we used an interest rate of 1.3 percent, which is today’s average. However, we used an interest rate of 3.5 percent to determine the minimum income. This is the interest rate banks will use when factoring your MSR (even if the real interest rate is much lower).
The HDB loan rate is 2.6 percent and rarely changes.
In each of the following cases, we have assumed that the buyers received their apartment at the age of 25. We have also accepted a loan term of 25 years.
How did we derive the required minimum income?
As part of the Mortgage Servicing Ratio (MSR), your monthly home loan repayment must not exceed 30 percent of your total monthly income (among all borrowers). We used the MSR to determine the minimum wage for a tenure loan.
How much do you need to pay for your apartment in just five years?
Using an HDB Loan
| details | quantity |
| Down Payment (10 percent of $ 320,000) | $ 32,000 |
| Loan amount | $ 288,000 |
| Monthly repayment with a 5-year loan term | $ 5,123.95 |
| Total interest for a period of 5 years | $ 19,436.93 |
| Combined minimum income required | $ 17,079.83 (Exceeds BTO Housing Income Limit) |
The income cap for buying a BTO apartment is currently $ 14,000 per month. This means that such a loan is usually not possible and you will either have to (1) buy a resale apartment (which has no income limit) or (2) make a much larger down payment to reduce the monthly loan repayment.
Using a bank loan
| details | quantity |
| Down Payment (25 percent of $ 320,000) | $ 80,000 |
| Loan amount | $ 240,000 |
| Monthly repayment with a normal term of 25 years | $ 4,133.57 |
| Total interest for a period of 25 years | $ 8,014.42 |
| Combined minimum income required | $ 14,553.40 (exceeds BTO apartment income limit, see above) |
ALSO READ: HDB Loans vs Bank Loans: Which One Should You Choose?
How much do you need to pay for your apartment in 15 years?
Using an HDB Loan
| details | quantity |
| Down Payment (10 percent of $ 320,000) | $ 32,000 |
| Loan amount | $ 288,000 |
| Monthly repayment with a 15-year loan term | $ 1,933.94 |
| Total interest for a 15 year loan term | $ 60,109.15 |
| Combined minimum income required | $ 6,446.46 |
Using a bank loan
| details | quantity |
| Down Payment (25 percent of $ 320,000) | $ 80,000 |
| Loan amount | $ 240,000 |
| Monthly repayment with a 15-year loan term | $ 1,468.28 |
| Total interest for a 15 year loan term | $ 24,289.48 |
| Combined minimum income required | $ 5,719 |
How much do you need to pay for your apartment in 25 years?
Using an HDB Loan
| details | quantity |
| Down Payment (10 percent of $ 320,000) | $ 32,000 |
| Loan amount | $ 288,000 |
| Monthly repayment with a 25-year loan term | $ 1,306.57 |
| Total interest for a period of 25 years | $ 103,970.45 |
| Combined minimum income required | $ 4,355.23 |
Using a bank loan
| details | quantity |
| Down Payment (25 percent of $ 320,000) | $ 80,000 |
| Loan amount | $ 240,000 |
| Monthly repayment with a 25-year loan term | $ 937.46 |
| Total interest for a period of 25 years | $ 41,237.63 |
| Combined minimum income required | $ 4,005.00 |
To repay the home loan only after 30 years:
HDB loans are limited to 25 years. If you start servicing the loan at the age of 25, it is not possible to extend the term of the loan beyond the age of 50.
However, it is possible for bank loans. The catch is that with a term of more than 25 years, the maximum financing drops to 55 percent. So you will need a larger down payment if you want to extend the loan that far.
Also note that the maximum repayment term for bank loans to fund HDB purchases is 30 years.
| details | quantity |
| Down Payment (45 percent of $ 320,000) | $ 144,000 |
| Loan amount | $ 176,000 |
| Monthly repayment with a 30-year loan term | $ 590.66 |
| Total interest for a 30 year loan term | $ 36,639.28 |
| Combined minimum income required | $ 2,634.40 |
To make things easier, we’ve also broken down how much it would cost to pay off a BTO in both a mature and a non-mature estate. For this example we used the prices from the most recent BTO sales launch in November 2020 – Tengah (not mature) and Toa Payoh (mature).
Combined Minimum Income for HDB Loans
| Minimum. Income (HDB loan) | 3 rooms | 4 rooms | 5 rooms |
| Mature BTO price | $ 324,000 | $ 466,000 | $ 627,000 |
| At the age of 30 | 17,293 USD * | 24,873 USD * | 33,466 USD * |
| At the age of 40 | $ 6,527 | $ 9,388 | $ 12,631 |
| With 50 years | $ 4,410 | $ 6,342 | $ 8,534 |
| Not mature BTO price | $ 194,000 | $ 288,000 | $ 394,000 |
| At the age of 30 | $ 10,355 | 15,372 USD * | USD 21,030 * |
| At the age of 40 | $ 3,908 | 5,802 USD | $ 7,937 |
| With 50 years | $ 2,640 | $ 3,920 | $ 5,362 |
Note that at 25 years, the maximum term for HDB loans is only 25 years.
Combined minimum income for bank loans
| Minimum. Income (BANK LOANS) | 3 rooms | 4 rooms | 5 rooms |
| Older estate BTO price | $ 324,000 | $ 466,000 | $ 627,000 |
| At the age of 30 | 14,735 USD * | 21,193 USD * | 28,516 USD * |
| At the age of 40 | $ 5,791 | $ 8,328 | 11,206 USD |
| With 50 years | $ 4,055 | $ 5,832 | $ 7,847 |
| With 55 years | $ 2,667 | $ 3,836 | $ 5,162 |
| Not mature discount BTO price | $ 194,000 | $ 288,000 | $ 394,000 |
| At the age of 30 | $ 8,823 | $ 13,098 | 17,919 USD * |
| At the age of 40 | $ 3,467 | $ 5,147 | $ 7,042 |
| With 50 years | $ 2,428 | $ 3,604 | $ 4,931 |
| With 55 years | $ 1,597 | $ 2,371 | $ 3,244 |
* This is not possible as this revenue exceeds the BTO limit.
Note that the funding for bank loans over 25 years for HDBs changes from an LTV of 75 percent to 55 percent.
ALSO READ: Do you want to buy an apartment? Read our guide to the new HDB portal
What about repaying the entire loan with a godsend?
Sometimes events like winning the lottery, receiving an inheritance, etc. provide an opportunity to repay the outstanding home loan.
With HDB loans, you can do this at any time with no penalty. For bank loans, you need to look for prepayment penalties. There is usually a period of time immediately after the loan is taken out (around three to five years is the norm) that if you attempt to repay the loan early, you will pay a penalty.
For most banks, this equates to 1.5 percent of the amount redeemed (e.g. if you tried to withdraw $ 100,000 in one go, you would pay a fine of $ 1,500). This does not apply to every loan package. Check this out before you pay.
Finally, an important note about early repayment of your home loan
Please remember that it is not advisable for everyone to repay their lump sum loan by 30 or 40, even if they could.
A fully paid home cannot pay for needs like meals or health care (unless you are willing to sell the home, which defeats the purpose). It is a mistake to empty your home loan early repayment savings and use personal loans in an emergency.
The typical unsecured loan has an interest rate of six to nine percent, while HDB loans are only 2.6 percent. In most cases, it is better for borrowers to save cash for emergencies, pay off their home loan slowly, and avoid using other loans.
ALSO READ: Million Dollar HDB House: What Is The Hype About?
This article was first published in Stackedhomes.
