How Much Housing Loan Can I Get?
January 18, 2023
It can be exciting buying your first home – not to mention nerve-wracking. We can imagine that a million questions must be running through your mind.
You might be thinking: How much housing loan can I get? How much of a loan can I get from the bank or licensed money lender in Singapore?
Before you take the plunge, you must decide how much you can realistically afford for your home based on your own current income, and current expenses.
You must take both into consideration before factoring in the additional costs of what you will need to pay upfront for your new mortgage.
This includes the resulting monthly repayments, and the added expenses of owning a new home.
How Much Housing Loan Can I Get?
Here are the various things to consider before getting a housing loan.
When asking how much housing loan can I get, the costs to be paid upfront are the downpayment, fees and charges for the agent, the stamp duty, legal fees, and others that will depend on your situation.
Pay attention to the length of your loan tenure – a longer loan tenure will give you more time to pay the loan, but also means you pay more interest overall. Get an accurate written schedule from your lender.
It’s also worth having a look at how much you can use from your CPF savings for your housing loan.
There will be several added expenses that you will not be able to use your CPF for. These include payments for your mortgage and fire insurance, property tax, and fees for the property management company.
When calculating how much of a mortgage loan can I get, note that the value of your current property that you are intending to sell could drop and you may exceed your loan-to-value (LTV) ratio.
The lender will run an affordability assessment on you based on your salary and expenditure and will make its decision primarily based on that.
Outgoing expenses will include other loans that you already have, as well as childcare, and child maintenance fees.
Calculating How Much You Need For A Mortgage Loan
You could begin with an online mortgage calculator. This useful tool will help you calculate your income and expenses, giving you a good approximation of where you stand financially.
The mortgage calculator will work out what you can borrow based on your income and outgoing expenditure. Income sources will include basic income, overtime, commission, car allowance, and bonuses.
So to work out the amount you need to borrow, you can first calculate how much you already have at your disposal such as your:
- Cash savings
- Sale proceeds from your old property, if any
- CPF savings
After knowing the cash you have to cover the cost of your home, you can subtract it from the total purchase price and additional expenses of your new property.
It pays to use a mortgage calculator as the lender’s decision will be based on your salary and monthly expenditure, as well as your credit history.
From there, you can answer the question of “how much mortgage loan can I get?”
After deciding the amount you need to borrow, you can calculate your monthly installment and total repayment amount.
What The Loan-To-Value Ratio?
The LTV ratio refers to the percentage of your home’s value or price you can borrow from a lender. The higher the LTV ratio, the riskier it is for the lender.
If you have an LTV ratio of 70%, then you may be loaned up to 70% of the price or value of the property, depending on which is lower.
Lenders prefer a lower LTV ratio, but this also requires you to make a bigger downpayment.
So if you’re wondering how much housing loan can I get, an understanding of the LTV ratio is essential.
How LTV Works
The LTV ratio works by measuring the relationship between the loan amount and the market value of the property securing the loan.
For bank loans, the highest LTV that you can get is 75%, with the remaining 25% payable as 5% cash and 20% from your CPF Ordinary Account (OA).
For HDB concessionary loans, the maximum LTV is 80%, with the remaining 20% payable via cash, your CPF OA, or a combination of the two.
Therefore, the LTV ratio ultimately decides the amount of money that you can borrow, and as a result, how much downpayment you need to pay with cash and/or your CPF OA.
If you purchase a resale home and have to pay more than its bank or HDB valuation, then this Cash Over Valuation (COV) must be paid in cash.
As an example, if you pay $415,000 for a property with a value of $400,000, then the $15,000 difference must be paid in cash.
What MSR And TDSR Are
The Mortgage Servicing Ratio (MSR) is a measurement of your monthly gross income used for servicing your home loan. It applies to HDB flats and executive condominiums (ECs) and is capped at 30%.
To know how much housing loan can I get, you can find out your MSR by dividing your monthly mortgage repayment by your gross income per month.
The MSR is inclusive of all your property’s loan obligations. For example, if you are currently paying $500 for a home loan and you earn $5,000 monthly, it will affect the MSR.
The calculation will be as follows: 30% of $5,000 is $1,500. The $500 will be deducted. Therefore, your new loan repayment amount will be $1,000.
The MSR will also take your spouse’s income into account during calculation.
For instance, if you both earn $5,000 each, you will pay a maximum of $3,000 for your home loan. This is 30% of the $10,000.
The Total Debt Servicing Ratio (TDSR) differs from the MSR (which is only concerned with mortgage repayments) in that it accounts for all debt repayments that reoccur on a monthly basis. This includes credit card repayments, car loans, and mortgage repayments.
Currently, the TDSR limit in Singapore is capped at 55% of your income.
So if you are wondering how much housing loan can I get, what this TDSR cap means is that your lender will not grant you a loan if that loan causes your TDSR to exceed 55%.
Factors That Affect The LTV Ratio
When considering how much housing loan can I take, there is no guarantee that you will receive the best LTV ratio. Neither the bank or HDB is obliged to give you the maximum LTV ratio.
There are several factors that may influence the LTV ratio, and hence a lenders’ decision:
Loan Tenure And Your Age
The LTV for private properties was set at 55% from 6 Jul 2018 if the loan tenure is more than 30 years or if the term plus your age is more than 65.
If you are buying an HDB flat, you can take out a loan worth 55% LTV if the maximum HDB loan tenure exceeds 25 years.
The same applies if your age plus the loan tenure extends to more than 65 years.
Therefore, if you take out a private home loan at age 35, you need to repay it before you turn 65 to qualify for the maximum LTV of 75%.
Number Of Existing Home Loans
You also need to consider other outstanding home loans you owe lenders. If you have one unpaid home loan, your LTV of a second home loan is capped at 45%.
For the remaining amount (which is 55% downpayment), half should be paid in cash, while the rest can be settled with your CPF savings or cash.
If you have two outstanding home loans, you can only borrow a third loan worth 35% LTV.
It is important to note that these LTV ratios are eligible for home loans with 30 years or less loan tenure, or 25 years or less for HDB.
If the loan tenure is more than 30 years or exceeds the age limit of 65, the LTV may be even lower.
Your Property’s State And Location
If your property has significant defects such as cracked walls its LTV may go lower. In addition, if it is located abroad or in a seedy or inaccessible location, you may receive a lower LTV.
Remaining Lease Period
If your property has 36 to 40 years left on its lease, its maximum LTV is capped at 60%. You can still cover 15% of its value with your CPF to meet 75% of its price.
However, getting a home loan is usually impossible if your property has 35 years or less on its lease.
In addition, you cannot use your CPF savings for a property that is 30 years or less left on its lease.
Your Credit Score
Your credit score also matters. Lenders will check your credit score and rating through your credit history. If your score is bad (close to 1,000) and your rating is terrible (HH), your LTV will go down.
A poor credit score caused by late payments or default means that lenders have to take on considerable risk by giving you a mortgage.
Maximum LTV You Can Get From Banks And HDB Loans
There is no universal LTV because the maximum LTV that you can get from a bank in Singapore is affected by the range of factors mentioned above.
In Singapore, if you’re interested in the maximum bank loan for a HDB property, the absolute maximum LTV from a bank is up to 75% of the property value or purchase price, while the absolute maximum LTV for a HDB loan is up to 80% of the property value or purchase price.
The HDB loan amount is closely regulated to prevent people from impulsively purchasing a property that they will not be able to keep repaying over the long term.
With regard to loan tenure, the max HDB loan tenure available is 30 years for HDB properties, while for non-HDB properties, it’s 35 years.
If you find yourself in a position where you are unable to secure enough of the funds that you need for your housing loan, another option is to approach one of the licensed money lenders in Singapore that are regulated by the government.
These legal money lenders in Singapore are usually more flexible in their approach to clients and can often offer a customised solution.
Find The Right Loan And Lender Today
When someone has decided to get a mortgage, be it a first-time buy or not, the critical question is how much housing loan can I get?
The answer will be different for each individual, based on the variables of their personal circumstances.
If you need a loan, try GS Credit. We are a trusted licensed money lender in Singapore that offers some of the most affordable interest rates and fees.