If you’re asking yourself the question “how much housing loan can I get?”, the answer is pretty simple.
In simple terms, your financial situation determines your mortgage.
If you are looking to get a housing loan, your employment situation and credit history are two other factors that a lender will consider when deciding how much housing loan to give you.
How Much Housing Loan Can I Get?
Before we answer that, consider what you can afford when determining how much you can borrow for a home loan in Singapore.
How much can you afford to spend on owning a home in terms of recurring payments and upfront fees? What monthly payment is required for the mortgage, and what can you afford?
We don’t want you to experience financial stress just after purchasing your ideal home, so let’s examine recurring expenses, loan payments, interest rates, and upfront costs.
The immediate costs are your upfront expenses. For example, how much money have you budgeted and saved for a downpayment on a home?
There are other upfront costs to consider: option fee, legal fees, stamp duties, commission agent’s fee, and other expenses.
So the cash downpayment applies to HDB loans with terms longer than 25 to 30 years or the ones that mature when you turn 65.
If you take a HDB loan, you should expect to pay a 15% downpayment.
For a bank loan, you will need to make a 20% downpayment.
For both, you can pay using cash, your CPF Ordinary Account (OA), or both.
So ensure that you have enough funds in your CPF OA well beforehand.
Monthly Mortgage Payments
It is crucial to take into account the loan payments each month and go for the mortgage you’re able to afford.
Consider the loan’s terms and monthly payments. You should be able to afford the monthly payments if your loan has a longer tenure. However, you’ll end up paying more interest over time.
To determine an appropriate monthly payment and the relative interest rates available, use an online mortgage calculator.
Remember that in the future, interest rates could alter. So pay close attention to the interest rate on your initial housing loan and the ones in the months and years that follow.
Ask the lender for a copy of the repayment schedule to be sure from the start.
Fortunately, you can later refinance your loan and obtain a better rate from a different bank.
Loan-To-Value Ratio Definition
Your loan-to-value (LTV) defines the amount you can borrow for your home loan. For example, an LTV of 70% means you can borrow just 70% of your property’s value.
The higher the LTV ratio, the higher the loan amount, and the bigger the risk posed to the lender. Sometimes, the price of a property may be valued at a higher price than its initial value. That discrepancy of the property is its Cash Over Valuation (COV).
You must take into account the COV because you will need to make this one-time payment in cash while buying the property in HBD.
Maximum LTV Ratios For HDB Loans And Banks
The maximum LTV for an HDB concessionary loan is 85%. However, the LTV of a bank loan is lower at 75%.
Also, you must deposit 5% in cash or from your CPF account to buy your home. Therefore, the upfront cost is 20%.
LTV ratios vary depending on the lender providing the mortgage, not the property type.
The LTV will therefore be 75% with a 20% downpayment if you wish to use a bank loan to purchase a HDB flat.
However, there are always lenders to turn to apart from HBD and the bank. Such is Credit 21, one of Singapore’s most reliable licensed money lenders.
How Much Can You Loan From HDB And Banks?
The financing institution will determine how LTV functions. Let’s figure out how much you require for this mortgage loan.
For instance, let’s say you wish to purchase a $600,000 HDB flat now priced at $615,000. That means there’s a $15,000 COV for it.
Thus, the highest HDB loan amount from HBD concessionary loans is $510,000. That covers 85% of the property value.
Since the cost is more than the value, HDB will use the property value, not its price, to give you the loan.
You need to pay $90,000 for the 15% downpayment. You’ll also need to find another way to pay the $15,000 COV because the loan won’t cover it.
With a bank loan, 75% LTV for a $615,000 apartment with a $600,000 worth is $450,000.
You can use $120,000 (20%) from your CPF OA and the 5% balance of $30,000 in cash to cover the upfront charges.
You’ll also pay for the $15,000 COV in cash. Therefore, you will have to find a way to pay $165,000 upfront.
Remember that you cannot take out a loan to cover the downpayment. Therefore, it is crucial to set aside funds for the downpayment.
What Determines The LTV Ratio?
Other Unpaid Mortgage Loans
If you have an unpaid mortgage loan, the LTV is as follows.
- Your LTV drops to 45% with each additional loan
- The lenders set a 35% maximum with two loans
For these LTV ratios, the maximum HDB loan tenure is 30 years, with a 65-year age cap. As you get older, your LTV will decrease.
The LTV for Singaporean borrowers over 65 years who want a home with a loan tenure exceeding 30 years is limited to 55%.
If you want to buy a HBD apartment at age 35 and keep the 75% LTV with the bank, make sure you pay before you turn 65.
Lease Time Balance of the Property
If the property you’re buying still has 36 to 40 years left on its lease, the LTV is 60%. Furthermore, you may use 15% of your CPF.
So, if the property you want to buy has 35 years or less left on it, you won’t be able to get a home loan to buy it.
Furthermore, you will be unable to use your CPF funds to purchase a property with a lease term of 30 years or less.
You must negotiate a private contract with the seller through a law firm to purchase such a property in monthly installments.
Renting is also an option for wealthy buyers with access to personal banking.
State And Location Of The Property
Properties located abroad or in undesirable areas will significantly reduce the LTV ratio. The LTV ratio will be lower if the property has significant flaws.
Your Credit Report
Lenders will examine your credit report. Credit risks such as past late or unpaid invoices will lower your LTV to less than 75%.
So pay back your credit, personal, and house loans promptly as you prepare to buy a home.
How MSR And TDSR Work
The Mortgage Servicing Ratio (MSR) calculates how much of your gross monthly revenue is spent on mortgage payments.
The maximum MSR permitted by Singapore banks and HDB is 30%.
To know your MSR, divide your gross monthly income by the monthly loan installments for all your mortgages.
If you have a spouse, his or her income is considered while determining your MSR.
For instance, your maximum will be $3,000 if your spouse’s monthly income is $5,000 and you receive $5,000.
The Total Debt Servicing Ratio (TDSR) refers to the total you spend on all your debts, including credit card debt, auto loans, and mortgages.
The TDSR is now limited to 55% every month.
Get Help With Your Housing Loan Now
At licensed money lender Credit 21, we offer clear, flexible loan terms adapted to your capacity for loan payback.
So come prepared for a dependable, hassle-free service tailored to your needs.
Contact us when you’re ready to buy a HDB and need some help. Or apply for a loan with us right away.