If you want to purchase a home in Singapore, one of the first questions you may ask yourself is, how much loan can I get from bank? 

With so many banks and financial institutions offering home loans, it can be difficult to know where to start. 

In this article, we will discuss how much you can borrow from a bank for your home purchase so you can answer the question: how much loan can I get from bank? 

How Much Can You Borrow For Your Home Loan?

The amount you can borrow for a home loan is determined by several factors, including your income, credit score, and the value of the property you purchase. 

Typically, you can borrow up to 80% of the property’s value, although this can vary depending on the lender. Your income and credit score will also be considered, with lenders typically requiring a minimum income and credit score for loan approval. 

In addition, the CPF Board allows CPF savings to be used for housing needs. It is always recommended to consult with the lender to get a clear understanding of your home loan eligibility.

How To Use A Home Loan Calculator

To purchase a home, you first need to figure out how to calculate loan interest. Loan calculators can help you determine your monthly payments.

The first thing you must do is search online for a mortgage calculator. Take some time to compare prices and terms since many websites provide this service. 

Once you’ve located a few trustworthy websites, it’s time to enter some data. Enter the loan amount, loan period, and interest rate. The calculator will then display the total cost of the loan, including interest, the total amount of monthly repayments, and the total paid over the loan period. 

Once you have the results, you can compare different options and determine the best one for your needs. It is also essential to consider any additional costs such as the processing, late payment, and other fees that may be applicable. 

If you are satisfied with the results and decide to take out a loan, carefully read the terms and conditions and ask any questions you may have to the bank’s customer service representative. 

Make sure to compare different options and make an informed decision before you sign any documents. 

What Is The LTV Ratio?

The loan-to-value (LTV) ratio is the amount you can borrow to finance your home. It is expressed as a percentage of the appraised value of a property. 

Banks and other financial institutions use this ratio to determine the level of risk associated with a mortgage loan. The higher the percentage, the greater the risk for the lender. 

The ratio for bank loans can go up to 75%. You can pay the remaining 20% in cash or using your CPF Ordinary Account (OA), while 5% must be paid in cash. 

As for HDB loans, the LTV ratio was lowered from 85% to 80% on 30 Sep 2022. The remaining 20% can be financed through cash, your OA funds, or both.

How Does It Work?

The LTV ratio is calculated by dividing the loan amount by the property value. For example, if a property is valued at $500,000 and the LTV ratio is 80%, the maximum amount that can be borrowed is $400,000.

Note that the property price also influences the cash over valuation (COV) for the property. The COV is the difference between the market value of the property and the price at which the seller is selling it. For example, if a property is valued at $500,000 and the seller sells it for $515,000, the COV is $15,000.

What Is The Total Debt Servicing Ratio?

The Total Debt Servicing Ratio (TDSR) is a framework implemented by the Monetary Authority of Singapore (MAS) to ensure that individuals do not overextend themselves financially by taking on too much debt. 

The TDSR calculates the proportion of your gross monthly income used to service their debt obligations. The TDSR applies to all types of loans, including mortgages, credit card debt, personal loans, and car loans.

The TDSR framework requires that borrowers stay within a TDSR of 55%, which means that at most 55% of your gross monthly income should be used to service your various debts. 

For example, if an individual’s gross monthly income is $10,000, their TDSR would be $5,500. They could take on a mortgage of $5,500 or less, assuming they have no other outstanding debts.

The TDSR imposes three restrictions on borrowing:

Income Calculation 

The TDSR framework restricts income calculation, including all forms of variable income. 

Banks must assume that this variable income is 30% less than the actual amount when calculating the TDSR. 

For example, a business person who makes $5,000 per month would have their income considered $3,500 for TDSR calculations, resulting in a lower loan amount that can be approved. 

Average Age

Under the new TDSR framework, the average age of all borrowers will be considered. So a 23-year-old and a 55-year-old taking on debt together would be considered 39 years old. 

In addition, only borrowers with an income will be considered in the average age calculation, so if a co-borrower, like a child, is not earning any income, his or her age will not be included in the average. 

Stress Test

The TDSR framework implements a stress test to determine your ability to repay the loan in the event of an interest rate increase. Under the stress test, you must be able to service your mortgage payments even if the interest rates increase by up to 3%.

How Does TDSR Differ From MSR?

The Mortgage Servicing Ratio (MSR) ensures that borrowers do not take on excessive housing loans. Under the MSR, only 30% of your gross monthly income can be used towards repaying their home loan, regardless of other outstanding debts. 

Therefore, if you are already making payments on multiple loans, you must take the TDSR limitation of 55% into consideration, which includes all types of debts.

Factors That Lower Your LTV Ratio

Let’s now look at different variables that can lower your LTV ratio. 

Remaining Lease On The Property 

Properties with a remaining lease of 36 to 40 years are often subject to stricter lending guidelines. The maximum LTV ratio, in this case, is usually capped at 60%. 

However, it is still possible to use your Central Provident Fund (CPF) savings to pay up to 15% of the property price or value, whichever is lower.

On the other hand, properties with 35 years or less remaining on the lease are generally not eligible for home loans. Properties with lease terms of 30 years or less are also not eligible for purchase with CPF funds.

Despite these restrictions, some buyers may still purchase such properties through monthly repayments. This can be achieved through private contracts negotiated with the seller through a law firm. 

Alternatively, wealthy home buyers with a high net worth may access special loans through private banking facilities.

Your Age And Loan Tenure

If the loan tenure exceeds 30 years or if your age plus the loan tenure exceeds 65, the LTV is capped at 55%. The LTV cap for an HDB flat is the same, but the maximum loan tenure is 25 years.

Let’s say you are 35 years old and taking out a loan for a private property. To have an LTV of 75%, you will need to fully repay your loan before you turn 65. Furthermore, the ratio can be reduced even further to 25% if you have outstanding loans. 

Outstanding Home Loans

When purchasing a second home, it is vital to know the LTV ratio. The ratio for a second home loan is capped at 45%. 

Out of the remaining 55% downpayment, half must be paid in cash, while the other half can be paid through your OA funds.

If you already have two outstanding home loans and are considering a third, the ratio will be capped at 35%. 

It’s worth noting that these ratios are only applicable for loans with a loan tenure of 30 years or less. The ratio may even be lower if the loan is older than 65 or has a longer term than 30 years (or 25 years for HDB).

Your Credit Score

Your credit score is a numerical representation of your creditworthiness. It is a major component of your ability to secure a loan. 

When applying for a loan, lenders will review your credit score to determine the likelihood of  repayment. The higher your credit score, the more likely a lender is to extend credit. A lower credit score, on the other hand, may result in a lower LTV ratio.

Location And State Of The Property

Depending on the location and condition of the property, the LTV cap may be significantly lowered. 

For instance, properties in particularly undesirable areas might result in a lower LTV limit than they would have if they were situated in a more desirable area such as those close to the central business district. 

The state of the property can also affect the LTV ratio. Properties that need substantial repairs such as old resale flats may be given a lower limit than those in good condition. 

Get The Best Home Loan In Singapore

When it comes to answering the question of how much loan I can get from a bank, it is important to note that the loan amount you can get from a bank depends on various factors. 

Therefore, it is best to consult a financial advisor or banker to understand your eligibility.

Are you looking for a loan to finance a property purchase or consolidate debt? Look no further than Horison Credit. 

We offer various loan options to meet your financial needs. With our low interest rates and flexible loan repayment terms, you can find a loan that fits your budget and lifestyle. 

Our application process is simple and quick so that you can get approved and funded quickly. Contact us now or apply for a loan today to take advantage of our competitive rates.