How Much Loan Can I Get From A Bank In Singapore?
February 16, 2023
When planning to buy a home in Singapore, one of the first question that comes to mind is how much loan can I get from bank.
The answer to this question is not a straightforward one, as it depends on several factors. To help you plan appropriately, we take an in-depth look at the factors that determine how much a home loan the bank will offer you.
In Singapore, banks typically offer loans of up to 75% of the value of the property. However, the amount you qualify for will depend on your individual circumstances.
In this article, we will look at some of the factors that banks consider when determining how much loan can I get from bank.
How Much Can You Borrow For Your Home Loan?
It’s important to know how much you need to buy your home and the portion of it that you can borrow from the bank. This will help you narrow down your home search, as you know your budget. But how do lenders decide how much you can borrow?
The amount banks in Singapore can lend you to purchase your home is known as the loan-to-value ratio.
Banks offer an LTV of up to 75%. Lenders will look at your income, your debts, and your credit history before they can determine your LTV. The borrower is expected to pay the balance of 25% from their CPF and cash. 5% in cash and 20% from their CPF Ordinary Account (OA).
The LTV the bank offers depends on change depending on the outstanding debts. Below is a summary of the LTV for individuals.
|Outstanding House Loans||LTV Limit||Minimum Cash Downpayment|
|No outstanding debt||75% or 55%||5% down payment for an LTV of 75|
|1 outstanding loan||45% or 25%||25%|
|2 outstanding loans||35% 0r 15%||25%|
The lower limit applies if the loan tenure is more than 30 years.
Based on all of these factors, lenders will give you a loan amount that they know you will be able to repay. You must analyse your finances to ensure that you can comfortably repay the loan.
How To Use A Home Loan Calculator
A home loan calculator will help you calculate the equated monthly installments that you need to pay towards your home loan.
The home loan calculator will give you an idea of how much you can borrow from the bank and help you find the best loan deal so you can make an informed decision. Using the home loan calculator will help you with the following:
Determine The Best Home Loan Deal
A home loan calculator gives you an idea of the best deal. You can compare the offers from various banks and choose one that suits you. Using the home loan calculator, you get to see the impact of the interest rate on the monthly payment and loan tenure. This gives you an idea of the home loan terms that are suitable for you.
It Helps You Know How Much You Can Afford
The calculator gives you an idea of what you can afford. Using different home price ranges, the calculator gives you an idea of how much you would have to borrow. You can assess your budget and see how much you can manage to borrow, and, in this way, get to know where to shop for a home.
Shows You The Impact Of The Downpayment
The higher your downpayment, the less you will need to borrow. The home loan calculator shows you the impact of the down payment. Use the home calculator to see the effect of different down payment amounts.
Make an informed decision on how much of a down payment you should pay for your home.
Helps You To Budget
The home calculator gives you an idea of how much down payment you will need, and you can start working towards raising the amounts.
A home loan calculator will give you accurate results and take away the burden of manual calculations. It also allows you to experiment with different interests and amounts so you can make an informed choice.
What Is The LTV Ratio?
The loan-to-value (LTV) limit determines how much you can borrow from a bank to purchase a home. Banks are allowed to offer lenders an LTV of up to 75%. This means you can borrow up to 75% of the value of the property.
The remaining balance of 25% is divided into two portions. A 5% portion that you must pay in cash and a 20% portion that you can pay using your CPF OA. To give you a better understanding of how LTV works, here is an example. Let’s say you want to purchase a HDB flat worth $500,000.
If you go to the bank, they will give you up to 75% of $500,000, which translates to $375,000. You can use $100,000 from your CPF OA and pay $25,000 in cash. Under the Monetary Authority of Singapore regulations, you are not allowed to take a loan to make the downpayment.
It is important to note that borrowing the loan does not guarantee the bank will offer you the maximum LTV.They consider several factors when determining the appropriate LTV.
Here are some of the factors.
Number Of Outstanding Loans You Have
If you have one outstanding loan, the maximum loan you can get is 45% of the value of your home. Of the remaining 55%, half must be paid in cash, and the remaining portion can be paid in cash or from an ordinary CPF account.
Those who have more than two outstanding loans and want to borrow a third to buy a home can get a loan for 35% of the property’s value.The bank will offer the above LTV if the loan tenure is 30 years or less. If the tenure exceeds 30 years and goes beyond your 65th year, they may give you even a low LTV.
Remaining Lease On The Property
Properties with a 36- to 40-year lease remaining only qualify for 60% LTV. However, you are allowed to use 15% of your CPF OA savings to pay for the property. Any property with a lease term of less than 35 years may be ineligible for a home loan.
Location And State Of The Property
The location and state of the property determine the LTV limit. Properties in less desirable locations may get a lower LTV. Additionally, properties that are poorly maintained or have major defects may result in a lower LTV.
During the loan application process, the lender will assess your credit score. Your score can cause the lender to classify you as a risk. Banks will offer you a lower LTV limit if you have a history of default or late payments. Make sure you have a good score before you make plans to buy a home.
Age And Loan Tenure
The maximum LTV for private properties with a loan tenure of more than 30 years is 55%. If your age extends beyond 65 years, the LTV is also capped at 55%. You need to ensure that you will have repaid your loan by the time you turn 65 years old.
Note: In case the seller of the property you want to buy offers it to you at a higher value than the market price, the difference is referred to as Cash Over Valuation (COV).
What Is The Total Debt Servicing Ratio?
The total debt servicing ratio (TDSR) is a measure of your gross income that you use to pay debts. This includes the home loan whose application you are submitting. As per the Monetary Authority of Singapore, your TDSR should not exceed 55% of your monthly income.
Lenders use the TDSR to assess your debt burden and prevent borrowers from overburdening themselves. To get your TDSR, you divide your debts by your gross income.
When calculating your TDSR, the bank will consider the impact of rising interest and how that affects your debt levels. Also, if you have variable income, the bank will tend to reduce the TDSR. You can consider applying for the home jointly with your spouse to increase TDSR.
How To Lower Your LTV Ratio
A lower LTV means you will access a lower loan amount from your bank. Here is how you can lower your LTV ratio.
Make A Higher Downpayment
Paying a higher deposit means you will have a lower loan amount. If you are looking for a way to reduce the amount you will get from the bank, consider making a large downpayment.
Purchase A Less Expensive Property
You can reduce your LTV by purchasing a less expensive property and paying a large downpayment.
It’s important to know how much loan can I get from bank before you start looking for a home. Make use of the home calculator and the information we have provided to make an informed decision as you get ready to purchase your next property.