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Now that I’m married, can we get a top-up grant and refinance to HDB loan?

[note]In summary:

– I bought a hdb flat under singles scheme.
– Not eligible for HDB loan. Took up a bank loan
– I got married after.
– We’re eligible for Top-up Grant and for HDB loan too.
– I can transfer to HDB loan by redeeming my bank loan.
– We now own our existing flat with a HDB loan. [/note]

(Part of “The Almost Complete Goondu’s Guide to Buying a HDB Flat in Singapore” series.)

These days, Singaporeans are spending more time pursuing their careers, and as a result, getting married at a later age. So what would happen if you’ve already bought a flat with a bank loan under the Singles Scheme (35 years or older) and just happen to meet and marry your spouse 2 years later?

You cannot sell off the flat and get another one with your spouse for another 3 more years, since minimum occupation period (MOP) for resale HDB flats bought with grant is 5 years. If you and your spouse’s combined income is still $8k or less, and your spouse has never taken a grant before, you can apply for a Top-up grant. This could mean an addition of $19k-$29k depending on whether your existing flat is near either of your parents. To learn how Top-up grants are calculated, check out the examples on HDB’s website.

If you wish to include your spouse as co-owner of your flat, things get a little complicated. On the legal front, the addition of a name into an existing mortgage lease is the equivalent of redeeming your existing loan, and taking out a new loan under both your names. This involves legal costs, some stamp fees, and your interest rate might change, depending on the prevailing interest rates offered. On HDB side, you would have to fill out a transfer of ownership application too.

Image by martywindle

Why then would you want to go through all this hassle? If you are planning to sell off your flat after 5 years, than maybe it’s not worth going through all the hassle. However, if you plan to keep it for the long term, it saves the legal complication that would be necessary, if something were to happen to you.

But there is another perk really, to adding your spouse to your flat. If you already qualify for a top-up grant, this means that it is likely that you qualify too for a HDB loan. With HDB loan interest rates pegged at 0.1% higher than CPF-OA’s interest rates, this means your interest rate is only 2.6% p.a., and more likely than not, it would remain that for the term of your loan.

For the long term, this is the lowest interest rates you can probably get, and its stable interest rates means you won’t suddenly be forced to fork out cash, which you would when bank variable loan interest rates start rising. Peace of mind.

To find out if you’re eligible for a HDB loan, fill out the HLE application form.

[tip]Fun Fact

Some people are tempted to finance their HDB flats with bank loan, even though they qualify for HDB loans. This is because with most bank loans pegged to SIBOR, and with SIBOR being really low due to the recession, starting loan interest rates are currently lower than HDB’s.

However, when the recession is over and the economy recovers, there is a high chance that SIBOR will rise and all SIBOR pegged home loans will have interest rates higher than that of HDB’s. In this case, even if you earned $8k or less, you cannot go back to HDB and say ‘hey can I refinance with a HDB loan?‘, because HDB does not allow.

In normal situations, you cannot take a HDB loan once you have taken out a Bank loan. The only situation I’ve come to learn of, where taking out a HDB loan to refinance a Bank loan is possible, is in the situation listed at the beginning of this post![/tip]

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