Are you sick of moving houses repeatedly and wishing to own a property in Singapore?
If so, it is the right time to take a mortgage loan. Mortgage loans are among the simplest and most common financing options you can pay back in affordable monthly installments.
However, the burning question is: how to calculate housing loan monthly installment? This blog post will equip you with all the right knowledge to calculate home loan repayments. So, keep reading to find out.
What Is A Mortgage Repayment?
Mortgage repayment is the monthly sum of money you pay back after getting a home loan. These monthly installments include part of the principal amount as well as the accrued interest.
Regular mortgage repayments result in a reduction of the amount you owe, and you stay safe from penalties, fines, and losing ownership of the property.
Yes. A mortgage loan or housing loan is protected against the property you’re buying. This means you could lose the right to ownership of the house if you fail to make mortgage repayments.
So, before you close a deal with a lender, it is important that you check on the requirements of the money lender and your financial status.
How Much Mortgage Payment Can You Afford?
Before applying for a mortgage, it is crucial to analyse your financial situation; how much you can afford depends on your salary, costs, debts, and personal savings.
Other than these, the amount of the deposit also differs depending on the kind and worth of the house, the loan-to-value restriction, and any other mortgages like administrative fees, dealer commissions, and service charges.
The primary guideline in Singapore states that your loan must be 2.5 times your total annual salary. For instance, if your yearly salary is $100,000, a loan in the range of $200,000–$250,000 might be proposed.
Important: Remember that this is a general rule, not a law or restriction. The mortgage payment you can afford depends on your financial condition.
Now that you know about monthly payments let’s see how much you can actually borrow.
How Much Loan Can You Borrow For Your New Home?
The total loan amount you can borrow depends on four factors, which are discussed below:
The first and most important factor that can affect the total amount of money you can borrow is the Mortgage Tenure.
The period taken to repay the total mortgage amount in regular monthly installments is referred to as the loan or mortgage tenure. In Singapore, the maximal loan duration for a property is as follows:
- 30 years for Housing & Development Board (HDB) apartments.
- 35 years for non-HDB apartments.
Loan To Value Restrictions
A Loan to Value (LTV) restriction is a limit enforced on how much loan amount a person can get from a monetary organisation, like a bank or money lender, in order to obtain a home mortgage.
This restriction is dependent on a fraction of the worth of the property. Banks usually have an LTV of about 75%, whereas an HDB-granted loan limit allows a total LTV of 80%.
Total Debt Servicing Ratio
Another factor is the Total Debt Servicing Ratio (TDSR). It is an estimate of how much of the net monthly salary will be used to pay off current debts plus the mortgage loan being requested.
This criterion was introduced to prevent Singaporeans from taking out loans that exceed their needs. According to the Monetary Authority of Singapore, the TDSR must not be greater than 55% of the consumer’s monthly gross earnings.
Mortgage Servicing Ratio
Last but not least is the Mortgage Servicing Ratio (MSR). A Mortgage Servicing Ratio restricts the sum of money one can acquire and repay monthly.
More specifically, your mortgage installments cannot be greater than 30% of the monthly earnings. By following this guideline, you can prevent using an enormous portion of your monthly earnings to pay down your loan.
All the above-mentioned factors play a crucial role in determining the amount of money you can borrow as a loan.
How To Calculate Housing Loan Monthly Installment
Now that you know what a mortgage repayment is, how much you can afford, and the factors that are responsible for the total money you can borrow, let’s learn how to calculate housing loan monthly installment.
Thankfully, there are plenty of online tools that can help you calculate your monthly repayment or installment with just a few clicks. These are known as mortgage calculators or installment calculators.
You’ll find these repayment mortgage calculators on numerous popular banks’, money lenders’, and government websites.
1. Credit 21
Credit 21 is an exceptional money lending as well as a calculating platform where you can calculate your housing loan monthly installment.
After calculating, you can even apply for a mortgage on Credit 21, which is a fairly simple process.
2. Government-Owned Websites
You will also see two government websites offering mortgage calculators. One is the Central Provident Fund Board’s CPF loan calculator, and the second is MoneySense’s website (Singapore’s national financial education programme).
The best thing about these mortgage calculators is that they both come from trusted sources and follow applicable laws and norms of the Monetary Authority of Singapore.
How To Use A Mortgage Calculator
Till now, you have learned everything you need to know as well as the most critical part of how to calculate housing loan monthly installment in Singapore in the last section. The next thing on your mind would probably be how you would use a home loan calculator.
A mortgage calculator is a digital tool that calculates the monthly cost of a mortgage deal. It is an easy-to-use and handy tool that helps people estimate how much they would need to pay every month if they take out a housing loan.
So, a typical Singapore mortgage loan calculator would ask borrowers to input some data and then calculate your monthly loan repayments.
Every platform has its own set of requirements, but most calculators ask for the following:
- Loan amount
- Loan tenure
- Loan type
- Property type
- Interest rate
Once you have entered your values, hit “Calculate,” and the calculator will give you an estimated monthly repayment amount.
That’s it – you’ll get an idea about how much will go out of your pocket every month if you decide to get a loan.
Now it’s time to research and find suitable housing loan options in the market.
Safe, Fast, & Reliable Loan Providers
You have three options when it comes to shopping for mortgage loans: 1) Government serviced HDB loans 2) Bank loans 3) Licensed money lenders.
The first two options are the most popular but have some restrictions that make them unfavourable for you.
For instance, HDB loans will allow you to use CPF for the downpayment, but you can only buy a flat with it. Plus, they have certain income and ownership requirements.
Similarly, banks offer lower interest rates, but they also vary with time. Plus, they have an extensive and rigorous loan application and assessment process, which can often be very lengthy.
This is where licensed money lenders like Credit 21 prove useful. They have flexible loan terms, lenient eligibility criteria, and a much smoother loan application process than both banks and HDB loans.