Even with an approved HFE letter, the final loan offered by HDB can be lower than the preliminary maximum amount stated. Key reasons include:
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### 1. Mandatory CPF OA Clearance (CPF Wiping Rule)
HDB operates under a "right-sizing" debt policy. If you take an HDB concessionary loan, you are required to use **all available CPF Ordinary Account (OA) savings** toward the purchase price, retaining only up to **S$20,000 per person**. If your OA balance exceeds the standard downpayment requirement, HDB reduces the borrowing quantum to match only the remaining shortfall.
### 2. Loan-to-Value (LTV) and Valuation Discrepancies
The 75% LTV cap is applied to the **lower** of the purchase price or HDB's official market valuation:
* **Cash-Over-Valuation (COV):** If you purchase a resale flat for S$550,000 but HDB values it at S$530,000, your 75% loan is calculated against S$530,000. The S$20,000 COV cannot be financed by the loan.
### 3. Lease Decay & Age 95 Rule
For an HDB loan, the flat's remaining lease must cover the youngest applicant to at least **age 95**:
* If the remaining lease falls short of age 95, the maximum 75% LTV is **prorated downwards**.
### 4. Fresh Debts & Changes in Financial Profile
Between HFE issuance and legal completion, HDB reviews your credit profile:
* **New Liabilities:** Taking on personal loans, renovation loans, car loans, or large credit card balances adds monthly debt, breaching the **30% Mortgage Servicing Ratio (MSR)** or **55% Total Debt Servicing Ratio (TDSR)**.
* **Employment Disruption:** A job change, sudden drop in salary, commission fluctuations, or unpaid leave reduces your verified average monthly income.
### 5. Adverse Credit Bureau Singapore (CBS) Records
Recent defaults, late payment flags, or excessive unsecured credit inquiries logged after the HFE letter can prompt HDB’s credit evaluators to reduce your borrowing limit or decline the loan facility.
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Gan Eng Joo Onassis 颜荣裕, REALTOR®
MSc BIT (Middlesex, England, United Kingdom); BBA (South Australia)
CEA Reg No: R021244C | Singapore Line:
(+65) 88899918
Email: onassis@sgagent.com
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