How Much Can You Get For Your Housing Loan?
No matter if you’re a first-time buyer getting your feet wet in the property market or highly experienced buyer and seller, you must have considered one important question at some point. This question is: how much housing loan can I get in Singapore?
This article will help you answer this question, and look into the various factors that affect the housing loan amount you can get from a lender.
How To Know The Loan Amount You Can Afford
Before we start to answer that question, there are two points that we will need to consider:
- What is a home loan amount that I can really manage?
- How much can I get from a bank or licensed money lender in Singapore?
As a buyer, you must decide what is realistically affordable based on your own current income balanced against your current expenses.
Consider various costs such as what you must pay upfront for your new property, the resulting repayments every month, and the other expenses that come with buying a new property. Some of these include:
Examples of upfront costs include the downpayment, the agent fees and charges, stamp duty, fees for legal procedures, and others – depending on your own situation when it comes to how much housing loan can I get.
Pay attention to the length of your loan tenure. A longer loan tenure provides additional time to repay the loan.
However, it also means you end up paying more interest overall. So make sure your lender gives you an accurate written schedule.
It’s also useful to examine how much you can use from your CPF savings for your housing loan.
Also, there will be several additional costs that you will not be able to pay for using your CPF. These include fire insurance, mortgage insurance, fees for the property management company, and property tax.
So when looking at how much housing loan can I get, be aware that the value of your home could also drop and you may end up exceeding your loan-to-value (LTV) ratio.
The lender will assess your eligibility primarily based on your monthly expenditure versus salary.
Examples of such expenditure include other outstanding loans, child care costs, and child maintenance payments.
Factors That Affect The Housing Loan Amount You Can Get
When applying for a housing loan in Singapore, the loan amount you can get depends on various factors.
Firstly, your income is taken into account as it will determine how much you are able to borrow. Your CPF Ordinary Account (OA) balance, age and credit score will also be reviewed by a lender when determining the maximum loan quantum that you can receive.
Type Of Property
Other than your financial situation and ability to pay back the loan, the type of property you are purchasing may affect the amount of loan you can take out.
For example, private properties have higher restrictions compared to HDB flats when it comes to a housing loan.
The Lender That You Choose
In addition, different banks and licensed money lenders offer varying terms and conditions when providing housing loans. So it is important to shop around and compare different lenders before making a decision.
Calculating How Much You Need For A Mortgage Loan
When considering what is a good way to calculate how much housing loan can I get, an online mortgage calculator is a good way to start. These tools will calculate your income and monthly expenses, which will give you a good idea of your financial situation.
Mortgage calculators differ, but most of them require these fields:
- Loan tenure
- Loan amount
- Annual interest rate
- Type of property
- Property status (i.e. completed or under construction)
From the lender’s point of view, if you prepare your case by looking at a mortgage calculator, it will be useful because their decision will be based on your monthly expenditure and salary. Of course, your current credit rating also matters.
It helps if you are financially savvy and possess sound household bookkeeping practices. However, if you’re not, then spending some time on a good online mortgage calculator will give you a good initial financial overview of the housing loan amount you can get.
What The Loan-To-Value Ratio?
The LTV ratio is used by lenders to get an accurate gauge of how much you can borrow and how much your down payment should be. It is used to help a lender determine if it should give you the credit you’re looking for.
In practice, the LTV ratio is the percentage of your home’s value that you can borrow to fund your property purchase. If you have an LTV ratio of 60%, then you may be loaned up to 60% of the price or value of the property, whichever is lower.
Lenders like to see a lower LTV ratio as a lower loan amount is less risky for them. But to a borrower, the downpayment will have to be more.
When you’re considering how much housing loan can I get, a solid understanding of the LTV ratio is a must.
How LTV Works
The LTV ratio works by making a measurement of the relationship between the loan amount and the market value of the property you have secured the loan with.
- For bank loans, the highest possible LTV in Singapore is 75%, with the remaining 5% to be paid as cash, and 20% from your cash savings or CPF OA.
- For HDB Concessionary Loans, the maximum LTV is 80% as of 30 Sep 2022, with the 20% remainder payable in cash, your CPF OA, or a combination of both options.
The LTV ratio ultimately decides the loan amount that you can borrow, and therefore how much of a downpayment you need to pay with cash and/or your CPF OA.
If you decide to buy a resale home that is priced higher than its value, then this Cash Over Valuation (COV) amount must be paid using cash.
For example, if you paid $450,000 for a flat with a value of $420,000, then the $30,000 difference is payable in cash.
Factors That Affect The LTV Ratio
When considering how much housing loan can I get, it is not guaranteed that you will be given the maximum LTV ratio because there are numerous variables that may influence the lenders’ decision.
- Your credit history
- Any outstanding loans that you may have
- The loan tenure
- Your age
- The lease remaining on the property
- Where the property is located and its condition
Maximum LTV You Can Get From Banks And HDB Loans
As mentioned, if you want the maximum bank loan for a HDB property, the absolute maximum LTV a bank may provide is up to 75% of the property value or purchase price, while the maximum permitted LTV for a HDB loan is up to 80% of the property value or purchase price.
That being noted, there is also no one-size-fits-all LTV ratio for everyone because the maximum LTV that you can get from a bank or HDB in Singapore is affected by the above mentioned range of variables.
The HDB loan amount is carefully regulated to stop people from impulse buying a property that they will not be able to maintain long-term repayments for.
With regard to the maximum loan tenure, the maximum loan tenure allowed is 30 years for HDB properties, and 35 years for non-HDB properties.
Remember that if you’re in a situation where you are unable to get enough of the funds required for your loan, you can approach legal money lenders in Singapore.
Licensed money lenders in Singapore offer greater flexibility in their dealings with customers and can offer solutions of a more bespoke nature than banks. All licensed money lenders are governed by the rules in the Moneylenders Act.
What MSR And TDSR Mean
The Mortgage Servicing Ratio (MSR) refers to the percentage of your gross monthly income that is used for servicing your home loan for HDB properties and executive condominiums.
It affects how much housing loan can I get. You can calculate your MSR by dividing your monthly mortgage repayments by your total gross monthly income.
Your MSR is inclusive of all your property loans combined. It will also take your spouse’s income into account. It currently has a limit of 30%.
The Total Debt Servicing Ratio (TDSR) is different from MSR (which only calculates mortgage repayments) because it looks at all debt repayments monthly, including credit card repayments, mortgage repayments, and car loans.
At the moment, the TDSR limit in Singapore is set at 55% of your income.
If you are wondering how much housing loan can I get, what this TDSR cap means is that your lender will not give you a loan if doing so means your total monthly debt repayments will bust that 55% monthly debt limit.
Find The Right Housing Loan And Lender
It is wise to consider other factors when taking out a housing loan such as the applicable interest rate, fees and any additional charges or hidden costs that may be incurred in the process.
Other factors to consider include your income and financial capabilities, property type, and bank terms.
You need to assess whether you are able to financially support the loan repayment for the entire loan term without stretching yourself too thin.
Take all the factors mentioned above into account to ensure that you are able to secure a loan amount that is within your affordability and suitable for your needs.
Consulting a professional can be beneficial in helping you make an informed decision regarding your housing loan application.