Buying a property is a big-ticket purchase that requires commitment and planning. Hence, it’s not unusual to have potential homeowners ask the burning question: how much housing loan can I get?
In fact, the often-confusing journey of home ownership warrants the asking of a great many related questions such as:
- What is the maximum bank loan for HDB?
- How much can I borrow for home loan?
- How much loan can I get from the bank?
- What is the ideal HDB loan amount?
- What is the maximum HDB loan tenure?
- How much mortgage loan can I get?
- How much housing loan can I take?
Many are concerned not just about how much they can borrow for their housing loan, but also about the loan tenure.
The best way to start being a homeowner is to know as much about the topic at hand as possible, including how much housing loan can I get?
Before we discuss housing loans in Singapore, let’s start with some basic information about housing loans.
How To Know The Loan Amount You Can Afford
In order to know how much housing loan can I get for your mortgage, you must do calculations. Do not make the mistake of borrowing more than you need, as it becomes a burden when you need to pay back your housing loan.
Thankfully, you can avoid this by deciding wisely. The rule of thumb when it comes to housing loans is: do not borrow more than two or 2.5 times of your annual gross salary.
But if you are still asking: how much housing loan can I get? we are here to break it down for you.
Calculating The Amount You Need For A Mortgage Loan
As purchasing a home requires a sizeable sum, most of us have to opt for housing loans.
Let’s take an annual gross salary of $100,000 as an example. According to the rule of thumb we mentioned earlier, this means you can get a housing loan that does not exceed $250,000 (2.5 times your annual gross income).
With a loan not exceeding 2.5 times your annual salary, you can repay it without much trouble. An amount beyond that may be challenging to repay.
This simple formula should guide you when you want to borrow a home loan from a bank or licensed money lender. However, other factors such as your age, outstanding loans, the type of home you want to buy, matter.
Whatever your preference, be sure to only borrow an amount you can repay without difficulty and within a manageable period.
Now that you know how much housing loan can I get from a money lender or bank, let’s now look at other factors that determine how much you can loan in Singapore.
Understanding MSR And TDSR
You are likely to come across these two terms when you are trying to get a housing loan in Singapore.
Having a better understanding of what the two terms mean will help you know why you might not get the loan amount you hope to borrow for your housing loan.
TDSR stands for the Total Debt Servicing Ratio. It refers to the percentage of debts you have in proportion to your monthly income.
In Singapore, the TDSR is set at 55% of your gross monthly income. The amount of debt you take on, including your housing loans, cannot exceed this limit.
This stands for the Mortgage Servicing Ratio, or the limit imposed on HDB flats and executive condominiums (ECs).
The MSR in Singapore is set at 30% of your gross monthly income. Before you take a loan to purchase a property, it is best to calculate your MSR limit.
How MSR Is Calculated In Singapore
To calculate your MSR, take the sum of your monthly mortgage repayments for HDB properties and divide it by you gross salary per month. Multiply this figure by 100%. The figure you get should not exceed 30%.
If you are unable to meet the required MSR, here are a few options you can try:
- Extend your mortgage tenure. This will enable you to reduce your monthly repayment installments.
- Increase the downpayment amount so you borrow less and hence, repay less every month.
- Choose cheaper ECs or HDB flats.
Differences Between MSR and TDSR
The main difference between MSR and TDSR is that while MSR applies to two properties (HDB flats and ECs), TDSR factors in all your loans, including student loans, car loans, and mortgages.
Why Was MSR Introduced?
The main reason why MSR was introduced was to ensure Singaporeans only borrow what they can repay easily.
Does MSR Have Exemptions?
You are likely to be exempted from MSR guidelines if you are refinancing a HDB flat mortgage before 12 Jan 2013 or an EC that was bought before 10 Dec 2013. However, this only applies if the property in question is owner-occupied.
What Is The LTV Ratio?
The loan-to-value (LTV) ratio refers to the amount you can borrow from a lender to finance or refinance a property such as a home in proportion to its cost or value, whichever is lower.
For instance, if you have an LTV ratio of 80%, you can borrow an amount that does not exceed 80% of the accumulative value of the property you plan to purchase.
However, there are a few exceptions.
For example, when applying for a mortgage, and the lender requests for an evaluation of the property and finds that the suggested price is more than the property’s actual value, then that is referred to as Cash Over Valuation (COV).
In 2021, a new law on the LTV ratio came into effect. According to the law, all HDB concessionary loans in Singapore were capped at 85%, down from the 90% LTV ratio that was previously applied. In Sep 2022, this was further lowered to 80%.
With the latest LTV legislation in force, you should pay the 20% using cash, your CPF OA, or both.
If you want to take your loan from a bank, the maximum LTV ratio is 75%. This means 20% will come from cash, your CPF OA, or both, but the remaining 5% should be paid in cash.
Note that LTV ratios are not based on your gross monthly income, but the lender you are borrowing from. The lender is also not obliged to give you the maximum LTV ratio.
Factors That Affect The LTV Ratio
A few factors affect the LTV ratio. Here are some of them:
If you have an outstanding loan, especially a home loan, be sure that it will affect your LTV ratio. Mostly, when lenders realise that you have a pending loan, they are likely to set their LTV ratio at 45%.
Before approving a home loan, a lender will check your credit score. While licensed money lenders may be a bit lenient on this, banks are rigorous when checking a borrower’s credit score.
That means that a borrower with a bad loan repayment history may not be able to get a home loan in Singapore.
Even a loan that you took several years ago and delayed to repay can seriously affect your credit score. It is therefore a prudent thing to repay your loans on time.
In 2018, properties with a loan tenure exceeding 30 years started to attract an LTV ratio of 55%.
Location And State Of Property
Properties located in the suburbs often have higher LTV ratio with those in poor or undesirable neighbourhoods, which may attract a lower LTV.
If the property is in poor condition due to a lack of maintenance, it will also attract a much lower LTV ratio.
How To Lower The LTV Ratio
The lower the LTV ratio, the less risk for a lender, and the more likely you are to get your housing loan approved.
You can take steps to lower your LTV ratio by doing the following:
1. Buy A More Affordable Property
A more pocket-friendly property or home is an easy solution. You are bound to lower your LTV ratio if you buy a home that is more affordable, has no extended lease, and is not in an affluent location.
2. Make Larger Downpayments
Shrewd borrowers know that with large downpayments, they will end up paying smaller monthly installments even if they might take a little longer to complete loan repayment.
In the end, lenders have to give them lower LTVs than those who make a small downpayment.
3. Opt For A Shorter Loan Tenure
A shorter loan term equates to less risk for lenders and HDB. If you can afford to pay a higher mortgage for 15 or 20 years, you should lower your LTV ratio.
Pick The Right Housing Loan And Lender
So have you found the answer to your question, how much housing loan can I get? If you haven’t, in the event you are in need of a housing loan, you can count on U Credit.
We are a certified money lender in Singapore. For many years, we have assisted many like you to purchase their dream homes.
We offer low interest rates, a quick and easy loan application process, and flexible repayment.