Personal Finance

How Much Can You Borrow For Your Home Loan?

September 8, 2022

The question of how much you can borrow for your home loan depends on several factors. 

These include your income, the value of the property, and how much equity you have in your existing home. 

Other factors are debts and liabilities (such as credit cards and personal loans), and any other investments or savings you have.

The more you can borrow, the lower your income and expenses, or the higher the property’s value. 

A housing loan calculator in Singapore can also help you determine how much money you can borrow and what the repayments will be.

Read on to find out the amount you can borrow for a home loan.

How Loan Amount And Tenure Are Determined

When you want to find out how much you can borrow for a home loan, remember that your loan amount will be determined by what you can afford to pay back. 

It’s important to understand how loan amounts and tenures are determined so that you can make an informed decision about what is best for your situation.

The bank’s credit committee determines the maximum loan tenure based on factors such as your income and credit history. 

If you’re self-employed, your employment income is usually the main factor in deciding whether to grant you a loan. If you’re employed, your salary will be taken into account.

The banks that offer home loans in Singapore do not have a standardised table for determining how much they will lend to a borrower at any given time. 

The reason for this is that each individual borrower’s financial situation is different, so the amount of money they can afford to borrow may vary too. 

How Much Can You Borrow?

The maximum loan amount you can borrow in Singapore is directly linked to your income. 

Your housing loan amount will depend on your income level and the type of property you are purchasing. 

Your ability to obtain a housing loan also depends on other factors, such as your debt-to-income ratio and whether you have any existing loans.

The other factor is your loan-to-value (LTV) ratio. This refers to the ratio between the amount of money you will be borrowing and the property’s market value. 

Another way to determine how much you can borrow for your home loan is to use a Singapore mortgage calculator to estimate how much you can borrow.

What Is The LTV Ratio?

The LTV ratio of a mortgage refers to the percentage of how much money you can borrow compared to the value of your home. 

It is important because it will determine how much interest you pay on your home loan. 

The higher your loan amount compared to the value of your property, the higher the interest rate will be. The LTV ratio in Singapore is up to 80%. 

If you’re wondering “how much can I loan from HDB?”, the HDB resale loan allows you to borrow up to 80% of the resale market value of your flat, but most banks will only lend you 75% of that.

How Does The LTV Ratio Work?

The LTV ratio is an important factor when you are getting a mortgage loan. 

It shows how much of your home’s value is covered by your mortgage loan. The higher the LTV ratio, the higher the risk for the bank. 

This is why the bank will provide you with a higher interest rate on your mortgage loan.

The LTV ratio is calculated by dividing the amount you are borrowing from the bank by the total value of your home. 

For example, if you borrow $1 million and your home is valued at $1.2 million, your LTV ratio is 80%.

Factors That Lower The LTV Ratio 

In other words, the LTV ratio assesses how much risk you pose to the bank. 

The lower the LTV ratio is, the less risk the lender takes on as it does not need to loan you as much money.  

However, if you have a high LTV ratio, the lender has to let you borrow more, which will raise the interest rate. The lender also has to contend with the risk that you may default on the loan. 

The lender determines the LTV ratio, which is set based on your income, assets and other factors. 

Here are some of the most common reasons why your LTV ratio may be lower than expected.

You Have A Low Income

It’s common for borrowers to ask, “how much can I get from the bank?” 

If your monthly income is low, it is likely that the banks will not lend you a large sum of money. Most people can only borrow 80-90% of their property value in Singapore. 

This is because banks want to ensure that they can recover their money should anything go wrong with the borrower’s finances or if he defaults on his payments.

You Have A Large Amount Of Debt

If you already have existing debts, such as credit card debts or car loans, it is likely that the bank will consider this when calculating the LTV ratio for you. 

It will also take into account any other debts incurred by you during the application process. 

Such debts include financing fees for your new home loan or stamp duties for buying property in Singapore.

Your Existing Home Loan Has An Outstanding Balance

An existing bank loan for a condo that has not yet been fully paid off could affect how much you can borrow for another mortgage. 

If you have an existing mortgage on your current residence and plan to refinance it into your new home purchase, this will lower your LTV ratio.

It will also make it easier for lenders to approve your loan application. 

If possible, try to pay off as much of this outstanding balance as possible before applying for a new mortgage on your next home purchase.

Your Credit Score

A bad credit score will affect your ability to borrow the maximum housing loan in Singapore, which will also impact your LTV ratio. 

A poor credit score might make it difficult for you to secure a mortgage at a reasonable interest rate. 

If you are planning on applying for a new mortgage, ensure that you check if your current credit rating affects your LTV ratio before applying for one.

How To Get A HDB Loan

The Housing and Development Board (HDB) offers housing loans to Singaporeans looking to buy a property. These loans have been instrumental in boosting Singapore’s property market.

To get a maximum bank loan for HDB, there are several things you need to do:

  • Find out if you qualify for a housing loan by checking your eligibility criteria on the HDB website. 
  • Submit an application form online.
  • Get your documents ready – this includes your identity card, passport and employment pass/work permit.
  • Wait for approval from HDB for your home loan application.

Conclusion 

Homeownership is an important step in the life of most Singaporeans. 

It is a mark of financial security, social status and family bonding. But to make your dream home a reality, you might need to borrow a home loan. 

The amount you can borrow is determined by the lender and its credit policies. 

But the lender must also consider your income, savings, and ability to repay the loan. 

Banks are not your only option when it comes to a home loan. You can approach a licensed money lender too. 

GS Credit offers many loan packages at affordable interest rates. 

Contact us today or apply for a loan now.

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