Bankrupts find lifeline with new HDB loan plan

April 26, 2008

Bankrupts find lifeline with new HDB loan plan

Scheme makes it easier for them to find new homes while paying off their existing debts

By Arlina Arshad

ABOUT 40 people who have been made bankrupt and face trouble securing home loans from a bank or the Housing Board (HDB) have found a lifeline in the form of a new loan scheme.

Introduced in July last year by the HDB, these loans are designed to make it easier for bankrupts to find new homes and pay off their debts.

But loan applicants must first satisfy the HDB's criteria, which include having the money to service monthly mortgage instalments while still satisfying creditors.

An HDB spokesman told The Straits Times yesterday that proceeds from the sale of an existing flat should be used to finance a smaller home.

'To be realistic in determining what they can afford, buyers should consider their existing financial commitments.

'(These include) allowances to support children and parents, payment towards utilities and transport,' said the spokesman.

There were 25,961 undischarged bankrupts - people who are still paying off their debts - in Singapore as at the end of February this year, according to government statistics.

'Purchasing a flat is a long-term commitment. Buyers need to plan carefully and secure financing before committing to the purchase,' said the HDB spokesman.

Agreeing, housing agents said bankrupts wanting to downgrade must understand that selling and buying flats incur other costs such as conveyancing, agent and stamp fees.

Mr Eric Cheng, executive director of HSR Property Group, said one in every 30 clients he handles is a bankrupt wanting to downgrade his flat.

Their aim, he said, is to reduce their monthly mortgage instalments.

Mr Cheng said: 'I tell them that the selling price must at least cover the loan they are getting from the bank or HDB. Their next move must be very prudent, so it's better to engage a professional to help draw up a good financial plan.'

A bankrupt, who declined to be named, said the loan programme will help him reduce his financial burden.

There was no such provision when the 45-year-old engineering supervisor swopped his executive flat for a five-room flat in 2001.

'I still have a job so I am able to service my loans for a five-room flat,' he said. 'Some people might even have to rent as they have no choice.'

arlina@sph.com.sg


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Downgrading? Some tips



Check if the Official Assignee will accept cash proceeds from the sale of your flat

· The flat's sale price must cover outstanding loans owed to the HDB or your bank

· Check if a loan is required from your bank or the HDB to buy a new flat

· Engage a professional agent to come up with a sound financial plan

· Ensure that downgrading your flat will help reduce expenses significantly



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