It may seem obvious, but how much you can get for your housing loan in Singapore depends on how much a lending institution is willing to lend to you. That in turn is determined by various factors.
So if you’re asking how much housing loan can I get, your financial circumstances determine the mortgage you can get. Other factors include your credit history and employment status, which affect how much a lender will be willing to loan you.
In addition, whether your HDB loan application is successful depends on several factors such as HDB’s rules and regulations on HDB loans policies.
This article will help you answer the burning question: how much housing loan can I get?
What Is The Loan-To-Value Ratio?
Your loan-to-value (LTV) ratio refers to the amount you can borrow for a housing loan in proportion to the property’s value or price. In Singapore, you can’t borrow as much as you want.
Your LTV limit depends on the home you want to purchase, as well as your outstanding mortgages, if any.
A high LTV ratio denotes a higher-risk loan with higher interest. Most lenders prefer the LTV ratio to be kept low as it reduces their risks.
Sometimes, a property’s cost exceeds its initial value. This cost difference is known as the Cost Over Valuation (COV). You must consider the COV because it has to be upfront in cash.
Maximum LTV You Can Get From Banks And HDB Loans
As of 30 Sep 2022, the maximum limit for LTV for a HDB concessionary loan is 80%.
A Bank loan’s LTV is lower. The maximum bank LTV ratio is 75%. You can pay the 25% using cash or your CPF, out of which 5% comprises a cash downpayment.
LTV ratios differ depending on the lender, not on the property type.
So if you want to buy a HDB flat or resale unit using a bank loan, the LTV will be 75% with a 25% upfront cost.
If you don’t qualify for a bank or HDB loan, there are other lenders to fall back on such as licensed money lenders. One example is Lending Bee, one of Singapore’s best and most legitimate money lenders.
How LTV Works
How LTV works depends on your lending institution. Let’s say you want to buy a HDB flat valued at $600,000 with an asking price of $615,000. That means the COV is $15,000. To understand how LTV works, let’s calculate how much you need for this mortgage loan.
Calculating How Much You Need For A Mortgage Loan
For a HDB concessionary loan, the maximum bank loan for HDB, in this case, will be $480,000, or 80% of the property’s value.
That means you have to pay $120,000 (20%) by cash or from your CPF. But the loan won’t cover the COV, which you’ll have to pay by cash.
For a bank loan, a 75% LTV of $600,000, is $450,000. You can use $120,000 (20%) from your CPF to pay the 20%, then pay $30,000 (5%) in cash. Again, you have to pay the COV of $15,000 by cash.
Note that you can’t take a loan to finance the downpayment. So be sure you can pay for the downpayment before you get ready to own a home.
Factors That Affect The LTV Ratio
The LTV ratio determines your bank’s or HDB’s loan amount. But neither the bank or HDB is obliged to give you the maximum LTV. These factors may lower the LTV:
Other Outstanding Home Loans
Have an outstanding home loan? If so, with one other loan, your LTV reduces to 45%. With two loans, lenders will cap it at 35%.
So how much loan can I get from a bank? You’ll select the amount you can get within the 45% or 35% range, depending on the number of loans you have.
That means you’ll have an upfront cost of 55%, half of which you must pay in cash. You can pay for the other half using cash or your CPF.
However, the maximum HDB loan tenure is 25 to 30 years for those who are not older than 65. If you need a longer tenure and are older than 65 years old, the LTV may be even lower.
Age And Loan Tenure
The LTV for those who are older than 65 years old who want to own private properties for tenures exceeding 30 years don’t exceed 55%.
If you’re going to buy a HDB flat at the age of 35, make sure you pay before you turn 65 to maintain the 75% LTV with the bank.
Years Remaining On Lease
If the property you’re buying has 36 to 40 years left on its lease, the LTV is 60%. Also, you can use up to 15% of your CPF.
Note that if the property you’re buying has 35 years or less left on its lease, you can’t get a home loan to buy it. If the property has 30 years or less left on its lease, you won’t be able to use your CPF to buy it.
You must negotiate a private contract with the seller through a law firm to purchase such properties via monthly installments.
Wealthy buyers with private banking facilities may rent. But the publicly available systems don’t allow loans for such properties.
Property’s State And Location
Properties located abroad or in undesirable areas will reduce the LTV significantly. The LTV ratio will also be reduced if the property is in poor condition.
Your Credit Score
Lenders check the credit score of borrowers. Histories of late repayment or non-payment are credit risks to them. This will reduce your LTV to less than 75%.
So ensure that you repay your credit, personal, and housing loans on time as you prepare to own a home.
How To Know the Loan Amount You Can Afford
How much housing loan can I get? To know how much you can borrow in Singapore, consider what you can afford.
What ongoing payments and upfront costs do you have to pay? What is the loan installment you must pay every month, and more importantly,what can you afford?
Singaporeans aspiring to buy a home must set realistic expectations. This will help them find an affordable home. After all, you shouldn’t have sleepless nights after buying your dream home. Let’s look at the ongoing costs, loan installments, and upfront fees you must consider.
These refer to immediate costs. The most important upfront fee would be the downpayment. So be clear about whether you can pay your downpayment, or how you can save up for it.
Other upfront fees include the following:
- Option fee
- Legal costs
- Stamp duty
- Commission agent’s fee
- Renovation costs
- Other miscellaneous costs
The following cash downpayment statistics apply for a bank loan tenure exceeding 25 to 30 years, or one that ends once you turn 65.
|Outstanding Home Loans||Minimum Cash Downpayment|
|More than a single loan||25%|
So look at your CPF account to see if you have enough to pay for the downpayment.
However, as we’ll explain later, you’ll also incur several ongoing monthly expenses that your CPF won’t pay for.
Also, look at your income and cash savings. Do you have a steady income or work on a commission that depends on other factors?
Having an overview of your savings will help you see if you can afford the upfront costs and decide the loan amount you need.
Here are the ongoing expenses you’ll incur every month that your CPF won’t pay for:
- Monthly property taxes and insurance fees such as fire insurance, and homeowner’s insurance
- Management and conservancy service fees
- Interest hikes (for a floating home loan)
- Shortfall in case of a possible property value drop
Remember that these ongoing costs will have to be paid from your pocket. If you’re not prepared for these costs, they will strain you financially. So ask yourself if you’re ready to own a home.
However, you can consider getting an additional loan on top of your principal HDB loan amount to cater to these costs.
But using your savings is the best option because, again, you don’t want to have bad debt.
Mortgage Monthly Installments
Be sure to consider the monthly loan installments. This is why you must get a loan principal that you can afford.
Then look at the loan repayment period and its monthly payments. A longer loan tenure means you’ll pay a more affordable amount every month. But in the long run, you’ll pay more interest.
You can use the Lending Bee’s free personal loan calculator to estimate a suitable monthly payment and the relative interest rates available for a good gauge.
Remember that interest rates may change in the future.
So look beyond the introductory home loan interest rate and consider the one you’ll be charged in the months and years that follow. Ask the lender for a copy of the repayment schedule. If you can, refinance your loan and get a more suitable rate later.
What MSR and TDSR Are
The Mortgage Servicing Ratio (MSR) measures your gross income per month used in servicing a specific HDB loan. A maximum MSR of 30% is allowed.
Calculate your MSR by dividing your gross income by the monthly installments from all your home loans. If you have a spouse, their income counts in the calculation of the MSR. If you each earn $5,000, your maximum MSR is $3,000.
The Total Debt Servicing Ratio (TDSR) refers to your total repayment of debt per month. Therefore, it comprises the sum of your credit card debts, car loans, and home loans. The present limit for TDSR in Singapore is 55% per month.
Research Your Home Loan Options
Now that you have a clearer idea of how much housing loan can I get, the next step is to look for the right lender. Make sure you shop around for the best deal.
At licensed money lender Lending Bee, we have straightforward, customisable loan terms tailored to suit your loan repayment ability.
We are not one of those lenders that trouble you with tedious paperwork. No, we have simple online processes and minimal paperwork.
So, try us if and when you are ready to own a HDB flat and need an extra boost.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.