The thought of owning your first home or moving to a new home can be exciting.
However, one critical thing you should do is to get an idea of how much your new home will cost in terms of monthly principal repayment and interest rate over the loan tenure.
This can help you plan your finances, so you never run into trouble with cashflow.
In this article, we explore types of housing loans, how to calculate housing loan, and other factors that might determine the loan amount you can get.
Types Of Housing Loans In Singapore
When it comes to Singapore housing loans, the two major ways you can obtain a loan are: a HDB loan and bank loan.
HDB Loan
The HDB loan can only be used to purchase HDB flats. HDB loans have a loan-to-value (LTV) limit of 80% as of 30 Sep 2022. The LTV limit determines how much you can borrow from a financial institution.
An 80% LTV limit means that you can borrow up to 80% of the property value or price, whichever is lower.
The remaining 20% is the downpayment for the home that has to be financed with cash, your CPF savings, or both.
Bank Loan
Bank home loans can be used for HDB flats, private property or executive condominiums. Banks have an LTV capped at 75%, meaning you cannot borrow more than 75% of the price or value of the property.
There are different bank loans to consider when borrowing from a bank. It’s advisable you go with one that will be perfect for your financial situation.
Two major types are the fixed rate loan, and the floating rate loan.
For a fixed rate loan, the interest rate you are paying remains fixed for a period of time (typically one to three years), after which it transitions to a floating rate.
When it comes to a floating rate loan, the interest rate is pegged to the Singapore Overnight Rate Average (SORA). This information is available to the public, so there is transparency.
Loan Amount And Tenure
So how much can you borrow for your new home, and how long can the repayment period be?
These are the next questions you should consider when you are deliberating on taking out a mortgage or loan for a home.
What Is The Maximum Loan Amount You Can Borrow?
The maximum loan you can borrow is 80% of the property value for HDB loans, and 75% for bank loans.
However, how much you can borrow is dependent on several factors. They include:
- Age: The younger you are, the more you can borrow, as it is assumed you have enough years to pay back your loan. The minimum age to apply for a home loan is 21 years, while the maximum age is 65 years. Other age criteria might still apply for HBD loans. In the case of joint borrowers such as spouses, an income-weighted average age is used as their present age.
- Loan duration: The duration of the loan will also affect how much you can borrow. Loan providers may grant you a lower loan amount if the duration period is short, or a higher amount for a longer period.
- Type of property: Is the property a HDB flat, private property or an executive condominium (EC)? HDB doesn’t grant loans for private properties and ECs.
- Existing housing loan: If you are already servicing a mortgage, this can affect the amount you can borrow.
- Income: To get a housing loan in Singapore, the minimum income per annum is at least $24,000 for a single borrower and $36,000 for combined borrowers. Note that HDB also has a maximum income ceiling for single and combined borrowers. Nonetheless, when it comes to how much you can borrow, the higher your income, the higher you might be able to borrow.
- Credit score: Lenders will check your credit score to determine if you’re entitled to a full LTV. If you have a poor credit score, you will likely get a lower loan amount. A high credit score might lead to a higher loan amount and a lower interest rate.
What Is The Maximum Loan Tenure?
When it comes to loan tenure (repayment period), this is also capped depending on the type of property.
- HDB loans are capped at 30 years
- Private property loans are capped at 35 years
How Much Mortgage Can You Afford?
How much mortgage you can afford depends on your level of income because this will determine your Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR).
Before a loan provider will grant you a housing loan, they will first calculate your MSR in the case of HDB loans, or TDSR in the case of bank loans to determine how much you can be granted.
Mortgage Servicing Ratio (MSR)
The MSR applies to HDB homes. It restricts all your home monthly repayments to 30% of your gross income.
Keep in mind that your gross income doesn’t include CPF contributions made by your employer.
For instance, if your gross monthly income for a month is $2,000, then your MSR limit is $600.
This means that if your HDB loan monthly repayment exceeds $600, you will have to opt for a longer loan tenure (not beyond 30 years though), or increase your downpayment.
Total Debt Servicing Ratio (TDSR)
The TSDR applies when borrowing a home loan from a bank. The TDSR limit is put in place by the Monetary Authority of Singapore (MAS) to ensure borrowers aren’t over-leveraged.
The TDSR limit is set at a maximum of 55% or lower. This ensures all your loan monthly repayments including personal, student loans, car loans, etc don’t exceed 55% of your monthly gross income.
However financial institutions can grant loans to borrowers whose TSDR exceeds the limit in certain cases.
For example, if you and your co-borrower earn $15,000 per month, and you already have other loan repayments amounting to $3,000, your TDSR will be $5,250.
This is calculated as 55% of $15,000 minus $3,000.
Keep in mind that if you’re buying a HDB flat with a bank loan, you’ll need both MSR and TDSR.
Calculating The Value Of Your Property
If you want a new home, you need to know its value of your old property, so you can determine how much proceeds from its sales can go to your new property.
A lot of factors are considered when determining the value of your property at a given time. They include:
- Location
- URA zoning
- Land size
- Built-up area
- Number of rooms
- Age and condition of the property
- Vehicle accessibility
It’s best to hire the services of a professional property valuer to get the right value for your property.
How To Calculate Your Mortgage Payment
You can calculate your mortgage payment using an online mortgage loan calculator. To calculate your mortgage payment, you’ll need to know the:
- Loan principal
- Interest rate
- Loan tenure
Once you have these numbers, you can easily input them into the mortgage calculator or a housing loan calculator to arrive at your monthly repayment.
Assuming you are taking out a loan for $500,000, with an interest rate of 2.7%, and a loan tenure of 25 years. Your monthly mortgage repayment will be $2,294.
If you take out a $750,000 loan on the same terms, your monthly payment will be $3,341.
Having an idea of your TDSR will help you determine if you can afford your monthly mortgage payment.
Calculate Your Housing Loan Before You Apply
Depending on a lot of factors such as outstanding home loans, location and state of your old property, credit score, etc, it may be difficult to get a full LTV for a bank loan or HDB loan for your new home.
A lower LTV means you get to pay a higher downpayment, which you may not have at hand.
To finance your downpayment, you can take a quick bridging loan at U Credit, an established and licensed money lender in Singapore.
To find out how we can help, contact us today to speak with a loan specialist at +65 6337 1768, or apply for a loan online now.
Frequently Asked Questions
How Do I Calculate My Housing Loan?
You can calculate your housing loan monthly repayment by using an online mortgage calculator. This will show you the total amount you’ll need to pay for the duration of the loan.
Can I Use My CPF To Pay For A Housing Loan?
Yes. You can use your CPF to finance your monthly repayment – whether it’s a HDB loan or bank loan.
What Is The Maximum Loan Amount I Can Borrow?
The maximum loan you can borrow is 80% of the property value for HDB loans, and 75% for bank loans.
What Is The Tenure For Housing Loans?
HDB loans have a maximum tenure of 30 years, while bank housing loans have a maximum tenure of 35 years.
What Is The Buyer Stamp Duty (BSD)?
The BSD is a tax that homeowners have to pay when purchasing a property in Singapore. The amount paid depends on the price of the property. The higher the property, the more the BSD.
How Do I Calculate Buyer Stamp Duty (BSD)?
Your nationality determines the entire cost of the property. Singaporeans pay 1% for the initial $180,000, 2% for the subsequent $180,000, 3% for the following $640,000, and 4% for the remaining sum. You can also use an online calculator to get BSD.
How Do I Finance My Downpayment?
You can finance your downpayment for your new home with a combination of cash and your CPF. If you’re still short of funds, you can get a bridging loan at U Credit.
