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So…
You’ve decided to apply for the latest HDB BTO Sales Launch and now have to decide what HDB flat type to choose.
Should you just buy the largest flat that you can afford?
What if you only wish to live in the flat until you meet the Minimum Occupation Period (MOP) and want to sell it?
Are there any considerations that you should think about when deciding between a 3-Room, 4-Room, or a 5-Room flat?
Before we get ahead of ourselves, let’s do a little math to find out: what type of HDB flat can you REALLY afford?
TL;DR: Only Buy As Much House As You Can Comfortably Afford
For this exercise, we determined what is the minimum average monthly household income needed when considering which type of HDB flat to get.
How did we do this? we…
This is what we found out:
| HDB BTO Flat Type | Average Price (excluding grants) | Minimum Monthly Household Income |
|---|---|---|
| 2-Room Flexi | $134,700 | $627 |
| 3-Room | $232,000 | $2,100 |
| 4-Room | $341,500 | $3,817 |
| 5-Room | $459,500 | $5,657 |
| 3Gen | $473,000 | $5,910 |
Feel free to apply my calculations to your respective BTO or Resale flat purchase to see which type of HDB flat you can comfortably afford.
How Much Does The Average HDB Flat Cost?
We’ll be taking Tengah November 2019 BTO Sales Launch as a reference since it’s one of the few HDB projects recently which has (almost) all the various HDB types to choose from, namely:
The only HDB flat type which this estate doesn’t offer is a studio flat.
Average Price Of The Various HDB Flat Types (Excluding Grants)
Using the indicative prices of the BTO project we calculated the average price of the various HDB flat types:
| HDB Flat Type | Average Price (Excluding Grants) |
|---|---|
| 2-Room | $134,700 |
| 3-Room | $232,000 |
| 4-Room | $341,500 |
| 5-Room | $459,500 |
| 3Gen | $473,000 |
Average Price Of The Various HDB Flat Types (Including Grants)
Effective 11 Sep 2019, HDB rolled out a new grant, Enhanced Central Provident Fund Housing Grant (EHG) which replaced the existing Additional and Special CPF Housing Grant.
Assuming you and your partner are first-timers who meet all the eligibility criteria for the EHG.
You can expect to receive between $5,000 to $80,000 in grants.
Naturally, the final amount you qualify will ultimately depend on your average monthly income.
| Average Monthly Household Income* Over 12 Months | EHG Grant Amount | 2-Room | 3-Room | 4-Room | 5-Room | 3Gen |
|---|---|---|---|---|---|---|
| Not more than $1,500 | $80,000 | $54,700 | $152,000 | $261,500 | $379,500 | $393,000 |
| $1,501 to $2,000 | $75,000 | $59,700 | $157,000 | $266,500 | $384,500 | $398,000 |
| $2,001 to $2,500 | $70,000 | $64,700 | $162,000 | $271,500 | $389,500 | $403,000 |
| $2,501 to $3,000 | $65,000 | $69,700 | $167,000 | $276,500 | $394,500 | $408,000 |
| $3,001 to $3,500 | $60,000 | $74,700 | $172,000 | $281,000 | $399,500 | $413,000 |
| $3,501 to $4,000 | $55,000 | $79,700 | $177,000 | $286,500 | $404,500 | $418,000 |
| $4,001 to $4,500 | $50,000 | $84,700 | $182,000 | $291,500 | $409,500 | $423,000 |
| $4,501 to $5,000 | $45,000 | $89,700 | $187,000 | $296,500 | $414,500 | $428,000 |
| $5,001 to $5,500 | $40,000 | $94,700 | $192,000 | $301,500 | $419,500 | $433,000 |
| $5,501 to $6,000 | $35,000 | $99,700 | $197,000 | $306,500 | $424,500 | $438,000 |
| $6,001 to $6,500 | $30,000 | $104,700 | $202,000 | $311,500 | $429,500 | $443,000 |
| $6,501 to $7,000 | $25,000 | $109,700 | $207,000 | $316,500 | $434,500 | $448,000 |
| $7,001 to $7,500 | $20,000 | $114,700 | $212,000 | $321,500 | $439,500 | $453,000 |
| $7,501 to $8,000 | $15,000 | $119,700 | $217,000 | $326,500 | $444.500 | $458,000 |
| $8,001 to $8,500 | $10,000 | $124,700 | $222,000 | $331,500 | $449,500 | $463,000 |
| $8,501 to $9,000 | $5,000 | $129,700 | $227,000 | $336,500 | $454,500 | $468,000 |
*Includes ALL working persons’ (applicants and occupiers) income
What’s The Takeaway Here?
The lower your monthly household income, the more grants you’ll receive.
This means that (ideally) you should apply for an HDB BTO as early as possible.
Let’s look at two scenarios:
Couple A
Their monthly household income would be $2,500 which means they qualify for $70,000 in EHG.
Couple B
Their monthly household income would be $6,000 which means they only qualify for $35,000 in EHG.
See? The difference in grants qualified is almost twice.
But before you even apply, make sure that you’re in a committed relationship and avoid breaking-up after you BTO… it’s a really expensive and messy affair.
How Much Do I Need To Pay For My Monthly Mortgage?
Without getting into the debate of whether a bank loan or HDB housing loan is better, let’s look at how much you’d need to pay if you took an HDB housing loan.
After making the 10% down payment, you would be borrowing the rest at an interest rate of 2.6% per annum for 25 years.
Monthly Mortgage Of The Various HDB Types
Here’s what your monthly mortgage would look like:
| Average Monthly Household Income Over 12 Months | 2-Room Flexi^ | 3-Room | 4-Room | 5-Room | 3Gen |
|---|---|---|---|---|---|
| Not more than $1,500 | $188 | $585 | $1,032 | $1,514 | $1,569 |
| $1,501 to $2,000 | $210 | $607 | $1,055 | $1,516 | $1,592 |
| $2,001 to $2,500 | $233 | $630 | $1,077 | $1,539 | $1,614 |
| $2,501 to $3,000 | $256 | $653 | $1,100 | $1,561 | $1,637 |
| $3,001 to $3,500 | $278 | $676 | $1,123 | $1,584 | $1,660 |
| $3,501 to $4,000 | $301 | $698 | $1,145 | $1,607 | $1,682 |
| $4,001 to $4,500 | $324 | $721 | $1,168 | $1,629 | $1,705 |
| $4,501 to $5,000 | $346 | $744 | $1,191 | $1,652 | $1,728 |
| $5,001 to $5,500 | $369 | $766 | $1,213 | $1,675 | $1,750 |
| $5,501 to $6,000 | $392 | $789 | $1,236 | $1,697 | $1,773 |
| $6,001 to $6,500 | $414 | $812 | $1,259 | $1,720 | $1,796 |
| $6,501 to $7,000 | $437 | $834 | $1,281 | $1,743 | $1,818 |
| $7,001 to $7,500 | Not applicable | $857 | $1,304 | $1,765 | $1,841 |
| $7,501 to $8,000 | $880 | $1,327 | $1,788 | $1,864 | |
| $8,001 to $8,500 | $902 | $1,349 | $1,811 | $1,886 | |
| $8,501 to $9,000 | $925 | $1,372 | $1,834 | $1,909 |
^Average gross monthly household income for 2-Room Flexi (99-Year Lease) cannot exceed $7,000
If you’re wondering how I got these figures, I used a calculator like HDB’s Enquiry on Monthly Instalment to work out what is monthly mortgage (after deducting the downpayment and grant from the property price).
For young couples who:
the monthly mortgage for a 3-Room HDB BTO is relatively manageable at under $1,000.
Assuming I use the abovementioned Couple B’s income bracket ($5,501 to $6,000) as an example, they would pay around $789 a month on their mortgage for a 3-Room HDB BTO.
Which works out to be about 13% of their monthly household income.
So why is understanding this percentage important?
Here’s why…
What Type Of HDB Flat Should I Be Getting Based On My Monthly Income?
This is where we need to be really honest with ourselves and stay within our financial league.
To get a good measure of that, I’ll be using the Mortgage Servicing Ratio (MSR) which caps the amount that you can spend on mortgage repayments to 30% of your gross monthly income.
This way, we have a more realistic way of evaluating how much house you can actually afford.
In cases where the MSR is more than 30%, I’ll indicate it with a “Not Applicable” which means that if you fall within that income bracket and are considering that house, you might want to reconsider your options…
| Average Monthly Household Income Over 12 Months | 2-Room Flexi | 3-Room | 4-Room | 5-Room | 3Gen |
|---|---|---|---|---|---|
| Not more than $1,500 | $627 | Not Applicable | Not Applicable | Not Applicable | Not Applicable |
| $1,501 to $2,000 | $700 | ||||
| $2,001 to $2,500 | $777 | $2,100 | |||
| $2,501 to $3,000 | $854 | $2,177 | |||
| $3,001 to $3,500 | $927 | $2,254 | |||
| $3,501 to $4,000 | $1,003 | $2,327 | $3,817 | ||
| $4,001 to $4,500 | $1,080 | $2,404 | $3,894 | ||
| $4,501 to $5,000 | $1,154 | $2,480 | $3,970 | ||
| $5,001 to $5,500 | $1,230 | $2,554 | $4,044 | ||
| $5,501 to $6,000 | $1,307 | $2,630 | $4,120 | $5,657 | $5,910 |
| $6,001 to $6,500 | $1,380 | $2,707 | $4,197 | $5,734 | $5,987 |
| $6,501 to $7,000 | $1,457 | $2,780 | $4,270 | $5,810 | $6,060 |
| $7,001 to $7,500 | Not Applicable | $2,857 | $4,347 | $5,884 | $6,137 |
| $7,501 to $8,000 | $2,934 | $4,424 | $5,960 | $6,214 | |
| $8,001 to $8,500 | $3,007 | $4,497 | $6,037 | $6,287 | |
| $8,501 to $9,000 | $3,083 | $4,574 | $6,114 | $6,364 |
From this table, we can see that most income brackets would be able to afford a 2-Room Flexi or 3-Room HDB BTO flat comfortably.
$7,000 monthly household income cap for the 2-Room Flexi (99-Year Lease) aside.
If you want a 4-Room HDB BTO, your minimum household income should ideally be $3,817 or more.
Want to spring for that 5-Room HDB BTO? Your minimum household income jumps up to $5,657 or more.
And lastly, your minimum household income to afford a 3Gen HDB BTO should ideally be $5,910 or more.Considering that we’re using an HDB Housing Loan to service the mortgage, it means that we’ll be using our monthly CPF contributions to pay the monthly mortgage.
Some of you might find yourself in a situation where your monthly CPF contribution is insufficient to cover the cost of your monthly mortgage (eg. using one person’s CPF to make payments for the HDB housing loan).
Should you perform cash top-ups on top of your CPF payments in order to ‘afford’ that house?
Yes… and no.
If your cash top-ups come from a steady stream of passive income that is unaffected by unfortunate events like you, unfortunately, losing your job, then sure… why not?
But if you’re using money from your monthly household income to supplement your CPF contributions, then you’ll want to be very careful. BIn the unfortunate event where we either you or your partner are unable to continuously bring in that extra amount of money to meet your monthly mortgage, you’ll find that your finances will be severely stretched.
PS: If you are lazy to do your own math, you can always use our Affordability calculator.
3 days ago · 7 min read ·