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Which HDB Type Can You Buy From Your Monthly Wage?

What type of HDB flat can you afford given your current salary?

 

Recalling how Minister of Home Affairs & Minister for Law, Mr. K Shanmugam mentioned about the unrealistic real estate goals of young Singaporeans, we pondered about what is the dream home we can afford given our current wage levels.

With the Mortgage Servicing Ratio (MSR) being brought down from 40% to the current level of 30%, we have to consistently be mindful of how our wage levels will determine the type of dwelling we are able to afford.

Though it may seem unbelievable, the cheapest HDB apartment costs only $17,500, once you factor in deduction from government grants.

Read Also: How Much You Should Pay For Your First HDB

How Much Does The Average HDB Cost?

Using the HDB’s May 2015 Sales Launch as reference, here’s the average price (excluding government grant) of the brand new flats at Northshore Residence I & II, EastLink I & II and Tampines GreenWeave:

Exhibit 1: Average Price of Each Type of HDB

HDB Type

Average Price

Studio

$97,500

2-Room

$104,625

3-Room

$190,000

4-Room

$299,500

5-Room

$406,000

3Gen

$413,500

Source: Housing Development Board

We will assume that applicants are first-timers who are eligible to enjoy the Additional Housing Grant (AHG) and Special CPF Housing Grant (SHG).

Grants amount ranges from $0 to $80,000 depending on household income. As such, average HDB prices will differ depending on income levels

Exhibit 2: Cost of An Average HDB Type After Allocation of Grants

Monthly Wage

Studio 2-Room 3-Room 4-Room 5-Room 3Gen
Up to $1,500 17,500 24,625 110,000 219,500 366,000 373,500
$1,501 to 2,000 22,500 29,625 115,000 224,500 371,000 378,500
$2,001 to 2,500 27,500 34,625 120,000 229,500 376,000 383,500
$2,501 to 3,000 32,500 39,625 125,000 234,500 381,000 388,500
$3,001 to 3,500 37,500 44,625 130,000 239,500 386,000 393,500
$3,501 to 4,000 42,500 49,625 135,000 244,500 391,000 398,500
$4,001 to 4,500 47,500 54,625 140,000 249,500 396,000 403,500
$4,501 to 5,000 52,500 59,625 145,000 254,500 401,000 408,500
$5,001 to 5,500 62,500 69,625 155,000 264,500 406,000 413,500
$5,501 to 6,000 67,500 74,625 160,000 269,500 406,000 413,500
$6,001 to 6,500 N.A. N.A. 165,000 274,500 406,000 413,500
$6,501 to 7,000 N.A. N.A. 170,000 279,500 406,000 413,500
$7,001 to 7,500 N.A. N.A. 175,000 284,500 406,000 413,500
$7,501 to 8,000 N.A. N.A. 180,000 289,500 406,000 413,500
$8,001 to 8,500 N.A. N.A. 185,000 294,500 406,000 413,500

Note: Households earning more than $6,000 are not eligible to purchase HDBs Studio apartment and 2-Room flat.

Source: Housing Development Board

As you can see, a higher income household will encounter more expensive average HDB prices. This is because they enjoy lower grants. In other words, average HDB prices do vary depending on your income level due to the reduction in grant as a household income increases.

How much do I need to pay for my monthly mortgage?

First of all, you will need to make at least a 10% down payment if you intend to take a HDB housing loan. We assume homeowners will make a 10% down payment and borrow the rest at an interest rate of 2.6% per annum for 25 years.

Exhibit 3: Monthly Mortgage For Each Household Income and HDB Type

Monthly Wage Studio 2-Room 3-Room 4-Room 5-Room 3Gen
Up to $1,500 71 101 449 896 1,494 1,525
$1,501 to 2,000 92 121 470 917 1,515 1,545
$2,001 to 2,500 112 141 490 937 1,535 1,566
$2,501 to 3,000 133 162 510 957 1,556 1,586
$3,001 to 3,500 153 182 531 978 1,576 1,607
$3,501 to 4,000 174 203 551 998 1,596 1,627
$4,001 to 4,500 194 223 572 1,019 1,617 1,648
$4,501 to 5,000 214 243 592 1,039 1,637 1,668
$5,001 to 5,500 255 284 633 1,080 1,658 1,688
$5,501 to 6,000 276 305 653 1,100 1,658 1,688
$6,001 to 6,500 N.A. N.A. 674 1,121 1,658 1,688
$6,501 to 7,000 N.A. N.A. 694 1,141 1,658 1,688
$7,001 to 7,500 N.A. N.A. 715 1,162 1,658 1,688
$7,501 to 8,000 N.A. N.A. 735 1,182 1,658 1,688
$8,001 to 8,500 N.A. N.A. 755 1,202 1,658 1,688

Note: Calculation using a mortgage calculator with interest rate of 2.6% paid monthly for 25 years

The lower your household income is, the lesser you need to pay each month for your monthly mortgage. Incredibly, a household with less than $1500 income per month, will only need to pay $71 for a studio apartment.

The largest HDB (3Gen) is still affordable for the higher income bracket. They pay about $1,688 per month, which represents about 20% of their monthly wage for those in the $8,001 – $8,500 bracket.

Which HDB type should I be getting based on my monthly wage?

So the golden question is “which type of HDB should I buy based on my monthly wage?”

Using the MSR as a guideline, we take the monthly mortgage payment and have it divided by 30% to obtain how much you would need to earn in order to purchase the type of HDB you aim to get, and still be within the MSR.

As long as the amount is above your household income bracket, we would locate it as N.A. That means you will not be eligible to make the purchase of that HDB type because your monthly income would be insufficient to sustain the mortgage based on not using more than 30% of your monthly income for mortgage repayment.

Read Also: Why Singaporeans Should Stop Using Their CPF Money To Pay Their HDB Home Mortgage

Exhibit 4: Minimum Household Income In Order To Purchase A Specific HDB Type

Studio 2-Room 3-Room 4-Room 5-Room 3Gen
Up to $1,500 238 335 1,497 N.A. N.A. N.A.
$1,501 to 2,000 306 403 1,565 N.A. N.A. N.A.
$2,001 to 2,500 374 471 1,633 N.A. N.A. N.A.
$2,501 to 3,000 442 539 1,701 N.A. N.A. N.A.
$3,001 to 3,500 510 607 1,769 3,260 N.A. N.A.
$3,501 to 4,000 578 675 1,837 3,328 N.A. N.A.
$4,001 to 4,500 646 743 1,905 3,396 N.A. N.A.
$4,501 to 5,000 715 811 1,973 3,464 N.A. N.A.
$5,001 to 5,500 851 948 2,110 3,600 N.A. N.A.
$5,501 to 6,000 919 1,016 2,178 3,668 5,526 5,628
$6,001 to 6,500 N.A. N.A. 2,246 3,736 5,526 5,628
$6,501 to 7,000 N.A. N.A. 2,314 3,804 5,526 5,628
$7,001 to 7,500 N.A. N.A. 2,382 3,872 5,526 5,628
$7,501 to 8,000 N.A. N.A. 2,450 3,940 5,526 5,628
$8,001 to 8,500 N.A. N.A. 2,518 4,008 5,526 5,628

Note: Take the monthly mortgage from Exhibit 3 and divide by 30% to obtain the minimum monthly household income required in order to obtain the figures in this exhibit

As you may have noticed, 3-room HDB would be eligible for most household income categories. It also shows that the 5-room HDB and above should only be targets for those earning a minimum household income of $5,500 or more.

Are you intending to make your first HDB purchase soon? Feel free to share with us on Facebook your preferred repayment strategy, (1) using only CPF Ordinary Account monies, (2) Cash, (3) or a mixture of both.

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