Bridging loans in Singapore

How a bridging loan works

• What it pays for: OCBC’s terms allow it only for the deposit or down payment on the new home, or the legal fees and stamp duty on buying it.
• How much: DBS lends up to 20% of the purchase price. Other banks set their own limit.
• How long: MAS defines a bridging loan as one repaid within six months. OCBC requires repayment within six months or as soon as your sale completes, whichever is earlier.
• Interest: OCBC charges interest daily on the amount outstanding, payable every month until the loan is repaid. Banks quote their own rate.

Bridging loans and TDSR

• MAS Notice 645 exempts bridging loans from the TDSR limit, so the loan itself is not tested against 55% of your income.
• A bridging loan of six months or less also does not count as a debt when a bank works out TDSR for another loan.
• Your new home loan is still tested under TDSR or MSR, and capped by the loan-to-value limit.

What the bank asks for

OCBC lists these before it grants a bridging loan:

• A copy of the Option to Purchase or the sale and purchase agreement for the home you are selling.
• If you are selling an HDB flat you co-own, a letter from the other owners agreeing to pay the bank from the sale.
• A letter from the lawyers handling your sale confirming they will pay the bank the loan and interest from the sale proceeds when the sale completes.

How much your sale frees up

CPF Board pays out the sale price in this order. What is left in cash is what repays the bridging loan.

1. The outstanding loan on the home you are selling.
2. Your CPF refund: the CPF savings you used plus accrued interest, any housing grant with interest, and any pledged amount. The Home ownership dashboard on the CPF website shows your figure under "What Happens If".
3. Other costs of the sale, such as legal fees.

Worked examples

Each sells a home for $700,000 with a $150,000 loan, a $250,000 CPF refund and $10,000 of selling costs, which leaves $290,000 in cash. The new home costs $1.5 million, and the loan runs 4 months at a quoted 5% a year.

• $250,000 of cash due before the sale completes: the whole amount can be bridged. Interest is about $4,167, and $40,000 of the proceeds is left after repaying the loan.
• $350,000 due: DBS’s limit of 20% of the price is $300,000, and the sale frees up only $290,000, so the loan is $290,000 and you pay $60,000 yourself. Interest is about $4,833.

Timing the sale

• An HDB resale completes about 8 weeks after HDB accepts the resale application, so count from that date when you set the loan period.
• If you buy before you sell, you may owe Additional Buyer’s Stamp Duty on the new home. A married couple who meet IRAS’s conditions can claim it back by selling their first home within 6 months of buying a completed second home, or of the TOP or CSC of an uncompleted one.

Questions

Sources

• MAS Notice 645: Computation of Total Debt Servicing Ratio (PDF)
• MAS: Who TDSR applies to
• DBS: Home loans FAQ (bridging loan)
• OCBC: HDB home loan terms and conditions (PDF)
• CPF Board: What happens to the sale proceeds after selling your home
• HDB: Resale completion
• IRAS: Additional Buyer's Stamp Duty (ABSD)

Rules and fees change. Check the linked official pages before you commit, and ask a lawyer about your own sale or purchase.

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