Before 1 January 2003, people buying a HDB (Housing Development Board) flat have to finance it either with a HDB Concessionary Rate Loan or a HDB market rate loan. But since then the HDB market rate loan was replaced by home mortgage from financing institutions, which are gazetted by the Monetary Authority of Singapore.HDB Concessionary Rate LoanCompared to a home loan from a financing institution, a HDB loan has more stringent eligibility requirements. The below covers most of them.Eligibility Criteria:For HDB flats only (resale or direct purchase from HDB)
At least one buyer must be a Singapore citizen
Must have a gross monthly income not exceeding $10,000 (or $15,000 for extended families)
For DBSS flat the income ceiling is $8,000 (or $10,000 for extended families)
For applicants under the Single Singapore Citizen (SSC) scheme, the income ceiling is $5,000
Must not own any private residence (in Singapore or abroad), including HUDC and executive condominium
Must not have sold a private residential property within 30 months and taken a HDB loan before
Must not have previously obtained a HDB loan within 30 months
Must not have taken more than two previous HDB loans
Must not own more any market / hawker stalls or commercial / industrial property (Except if you operate the business yourself, have no other source of income, and only own one market / hawker stall or commercial / industrial property)From July 2013, HDB loan will not be granted for flats with less than 20 years of lease. In addition, for flats with lease between 20 and 59 years, loan approval and tenure will be subjected to certain conditions.Given the many restrictions of a HDB loan, why then do Singaporeans still want to take one? We delve further into the pros of this loan in the following sections.1. Higher CPF (Central Provident Fund) withdrawal limitFor financing by bank loans, the CPF Ordinary Account withdrawal cap is up to 100% of the valuation limit (VL), which is the lower of the purchase price or valuation at the time of purchase. If the loan is still outstanding when this limit is breached, the housing withdrawal limit can be increased to 120% VL provided that half (entire) of the prevailing Minimum Sum is set aside for borrowers below 55 (55 and above). This housing withdrawal limit varies with the purchase date of the flat, for purchases from 2008 onwards it is 120%.With a HDB concessionary loan, however, you can enjoy a higher withdrawal limit.For direct purchase from HDB, there is no limit to the saving in the Ordinary Account you can use.For resale HDB flats, there is no limit to the saving in the Ordinary Account you can use, after you have set aside half of the prevailing Minimum Sum.But from July 2013 onwards, for flats with leases between 30 and 59 years the use of CPF fund is allowed only if the remaining lease covers the buyer till at least 80. For such flats, the withdrawal limit will be computed based on the below formula:Withdrawal Limit= (The remaining lease of flat or property when the youngest owner is 55 years old / The lease of the flat or property at the point of purchase) x VLFor example, at the point of purchase the buyer is 38 years old and the lease is 40 years. When the buyer turns 55, the remaining lease will be 23 years. HenceWithdrawal Limit = 23/ 40 x VLTable 1 further illustrates what is VL.Table 1: VLFlat APurchase Price (S$) = 400,000Valuation (S$) = 350,000VL (S$) = 350,000Flat BPurchase Price (S$) = 370,000Valuation (S$) = 420,000VL (S$) = 370,000For flats with under 30 years of lease, use of CPF fund is prohibited. In other words, buyers will to cough up cash for the down-payment, monthly repayment of the loan, stamp duties and other miscellaneous fees.2. No cash component required for the down-paymentA key advantage of a HDB loan is that you do not have to stump up any portion of the down-payment in cash. You are allowed to use the balance in your CPF (Central Provident Fund) Ordinary Account to pay for it completely.Whereas with a bank loan, you will have to pay at least 5% of the Valuation Limit (VL) in cash. If the loan tenure exceeds 30 years or extends past the age of 65, the minimum amount jumps to 10%.3. Higher loan quantumFor the first HDB Concessionary Rate Loan you are taking, the loan quantum is as high as 90% VL. In contrast, for bank loans, the quantum is capped at 80% LTV (loan-to-value ratio). It dips to 60% if the loan tenure exceeds 30 years or extends past age 65.New regulations, that have kicked in from 12 January 2013, dictate that the mortgage servicing ratio (MSR) for private loans must not exceed 30% of the gross monthly income of the borrower and 35% for HDB loans.Effectively, this can translate into a lower loan quantum for a bank loan compared to a HDB loan.For example, for a 30-year loan with a 80% quantum for a S$800,000 HDB flat, at an interest rate of 1.5% p.a., the monthly repayment amount will be S$1,932.67. In order to be eligible for aHDB loan: Gross monthly income ≥ S$5,521.92
Private loan: Gross monthly income ≥ S$6,442.24Thus, if your income is below S$6,442.24, you will not be eligible for a private loan of 80% LTV. If you extend the loan tenure, current rules mandate that you can only take up to 60% LTV.Therefore, a HDB loan will allow a higher loan quantum.4. HDB is more lenient As a Government agency which main goals are to provide affordable quality housing and encourage home-ownership, HDB tends to be more tolerant of delinquent borrowers.But for a loan from a financing institution, you are always required to pay the monthly stipulated amount even if you have suffered a pay cut.Further, HDB usually grants deferment of monthly installment payment if you have fallen into financial hardship. The banks, on the other hand, will likely be hot on your heels if you defer payment even for a day!5. No penalty for partial or full repayment of loanOf note, is that HDB imposes zero penalty for partial or full repayment of its loan.Most mortgages of financial institutions, however, come with a lock-in period (aka commitment period) typically of 3-5 years. During this period, any repayment above the prior agreed amount will result in a penalty – usually at most 1.5% of the repayment amount. Financial institutions profit from the interest incurred on the loan, any partial or full repayment of the loan means a loss on interest earnings. Hence, the penalty helps to compensate for this loss.6. Stability in interest rateSince revision to the interest rate of a HDB loan is made quarterly in tandem with changes to the CPF rate, which has been the same for over 10 years. The interest rate has, likewise, remained stagnant. A HDB loan, thus, offers relatively more stability than even a fixed-rate mortgage which rate is only fixed for 3- 5 years. This is not saying that there have been no fluctuations in HDB interest rates. For instance, in the 1990s rates demonstrated more volatility.

Every year, as the Atlantic hurricane season approaches many businesses have a nagging realization that they are at risk due to a catastrophic “Black Swan ” event. Black Swan events are a constant source of risk in states like Florida where many communities are subject to disruption due to coastal storms. This risk is particularly acute for businesses that depend on the storage of on-line data if there is a chance their critical data could become lost or corrupted. But the threat from Black Swan events isn’t limited to Florida, nor is it limited to large scale disruptive events like hurricanes.The black swan theory or theory of black swan events describes a disruptive event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based on an ancient saying which presumed black swans did not exist, but the saying was rewritten after black swans were discovered in the wild. Consider the following scenario…”We tend to think of disasters in terms of the attacks on the World Trade Center, Hurricane Katrina, or other mega events. Sometimes, however, less notable events occur that can have a catastrophic effect on a business. In February 1981, an electrical fire in the basement of the State Office Building in Binghamton, New York, spread throughout the basement of the building setting fire to a transformer containing over a thousand gallons of toxin-laden oil. Originally thought to be PCBs, the toxins were soon determined to contain dioxin and dibenzofuran, two of the most dangerous chemicals ever created. The fire was smoky and quickly filled the 18-story building with smoke. As the transformer burned, the soot entered the buildings ventilation shafts and quickly spread toxic soot throughout the building. The building was so badly contaminated that it took 13 years and over $47 million to clean before the building could be reentered or used. Because of the nature of the fire, the building and its contents, including all paper records, computers, and personal effects of the people who worked there, were not recoverable. This type of event would be irrecoverable for many businesses.” – Operations Due Diligence, Published by McGraw HillWhat affect would a catastrophic hurricane that affected an entire region or a localized disruptive event like a fire have on the operation of your business? Could you survive that kind of interruption or loss? As the dependence on on-line data has grown in virtually every type of business, so has the risk that loss of their data could disrupt the operation of the business and even result in its complete failure. In response to these threats, there has been an evolution in the approaches used to mitigate these risks as the volume of on-line data has continued to grow. Originally, the concept of Disaster Recovery (DR) emerged as a mitigation strategy that focused on the recovery of critical data after a disruptive event by giving the business the ability to restore disrupted IT operations.Disaster Recovery (DR) involves a set of policies and procedures that enable the restoration of critical business data and allows the IT infrastructure to be restored to a prior state. DR was originally seen as the domain of the IT department who were given responsibility for mitigating the risk. To minimize the risk, system backups were scheduled frequently and aggressive DR plans that included server cold start procedures and data backups were implemented.The goal was to restore the infrastructure to the last point where the data had been backed up (at the time, typically on tape). The acceptable DR practices at the time allowed the IT system to be rebooted when the facility power was finally restored… Unless it was in a flood zone or the off-site backup storage facility had also been impacted. In either case, the operation of the facility could potentially be disrupted for some period of time and the data restoration was also potentially at risk depending on where backups were stored.Now let’s roll the calendar ahead… As technology evolved so did the Disaster Recovery strategies, which lead to new concepts that evolved to the requirements for a Business Continuity solution as a means of mitigating risk. Still seen as the domain of IT, as technology moved towards solutions like shadow servers, distributed data locations and high speed bulk data transmission with hyper connectivity. Data no longer had to be “recovered”, it just had to be connected in distributed locations where it could be remotely accessed. Business Continuity mitigated the risk of data loss and allowed a business to recover much more quickly and efficiently from a Black Swan event because its servers never went completely down.Business Continuity originally encompassed planning and preparation to ensure that an organization’s IT infrastructure remained intact enabling the business to efficiently recover to an operational state within a reasonably short period following a Black Swan event. Technology today has evolved towards cloud solutions that put both the data and the applications into remote “cloud” locations so it would seem the IT responsibility for mitigating the risk of on-line data loss or corruption has been solved. With highly connected, fully distributed solutions, some people feel the need for business continuity may be fading in criticality. Nothing could be further from the truth…The fact is the risk was never solely in the loss of the data but the loss of the businesses ability to operate. There are businesses that cannot tolerate any disruption to their operations. These include healthcare, insurance, and communications companies, critical logistic suppliers, transportation providers and local governments. It is during Black Swan events that the services and products these businesses provide may be most needed. The requirements of other, less critical businesses, whose operations could be interrupted for days or even weeks, but who might face a significant financial risk, may also make their continued operation a matter of corporate survival.Today’s technology has completely abstracted business processing and data from the user by moving critical IT infrastructures into the cloud. Cloud technology enables users to work from remote locations, but use of the cloud doesn’t fully mitigate operational risk. It means people have now replaced computers as the critical path to continued operations. The operation of the business is more likely to be interrupted because key personnel aren’t prepared to sustain operations during a Black Swan event. They don’t have a facility that has been proactively planned to support operations during disruptive events that could last for hours, days or weeks. Particularly in areas like Florida, where large natural disasters such as hurricanes can disrupt services to entire communities, resilient businesses need to prepare in advance for sustained operations during a disruptive event. The ability of a business to continue its operations during times of distress are a measure of the businesses resiliency.Business Resiliency: takes business continuity to another level because it makes it the domain of operations management rather than leaving it solely as the domain of the IT Department. When planning for disaster recovery or business continuity the critical link is now the people who are needed to operate critical systems remotely. Yes, there are occasions where staff can work from home or from remote facilities the business may operate, however, this is not always a satisfactory answer and even when it is, businesses often find themselves scrambling to play catch up, trying to figure out who does what and “how can we get it done under these circumstances” situations. During Black Swan events including regional disruptions like hurricanes or local disruptions such as fires, many of the people the business relies on may not have power, internet or even a phone needed to enable them to work from home. Because you can’t put people in the cloud, Business Resiliency requires planning, training and practice so that your staff knows how and when to mobilize.Resilient businesses integrate Black Swan response into their continuing operations so that, when they are needed, at a time when the business and the people are under stress, everyone knows how to respond efficiently and effectively and where to go to provide that response. Business resiliency requires a dedicated facility that has been hardened to withstand Black Swan events and has been designed to provide the support services the people and the IT infrastructure will both need. Business resiliency requires proactive planning and the integration of operating procedures into the businesses standard operating plans to include remote operations by trained critical staff who have been mobilized to respond during disruptive events and it requires proactive practice to ensure that, when remote operations are needed, the people are ready.