Everything you need to know about loan-to-value limits and the best home loans in Singapore.
[30 September 2022 Update]
HDB has just announced tightened cooling measures for properties in Singapore yet again.
Private homeowners (below 55 years old) can now only buy a HDB resale flat 15 months after selling their property, and the maximum amount of money home buyers can borrow to purchase their homes will be tightened to 80% with immediate effect.
Buying a house is an exciting endeavour, but it can be intimidating if you don’t understand the process. Whether you opt for a HDB or bank loan, you need to understand the terms and limits set for housing. In Singapore, the Monetary Authority of Singapore (MAS) sets the loan-to-value (LTV) ratio, among other rules you must adhere to when borrowing to buy a property.
In this post, we take an in-depth look at LTV and what you need to do when borrowing money to buy a house.
What is LTV in Singapore?
In basic terms, the loan-to-value ratio is the amount you are allowed to borrow to purchase your home as a percentage of your property’s value. It’s implemented to prevent borrowers from overleveraging their income.
In Singapore, the MAS sets the LTV limits and these vary depending on whether you take a HDB loan or bank loan.
The LTV limit for bank loans is set at 75%, while HDB loans have an LTV of 85%. Previously, the LTV for HDB loans was set at 90%, but it was revised downwards in December 2021.
On 30 September 2022, the government further slashed the LTV limit for HDB loans from 85% to 80%. The LTV limit for bank loans remains at 75%.
In addition, private property owners will now have to wait for 15 months after selling their property to buy a HDB resale flat to moderate demand in the HDB resale market.
This was done to cool off the housing market and promote continued affordability.
LTV limit for HDB housing loans
As mentioned, the LTV for HDB housing is set at 80%. This means the buyer needs to deposit a downpayment of 20% of the property purchase price in cash or using CPF.
Should you opt for staggered downpayment, it will be split into 5% and 15%.
LTV limit for bank loans
Thankfully, the revised limit will not apply to loans granted by financial institutions, which will remain at 75 per cent.
If you opt for a bank loan, you qualify for an LTV limit of 75%. The 75% LTV limit applies to loans with a tenure of 30 years or less. You will need to pay cash for a minimum of 5% of the downpayment.
You get an LTV limit of 55% for loans with a tenure of more than 30 years if it’s a private property, or of more than 25 years if it’s a HDB flat, or if the loan is expected to extend beyond the borrower’s 65th birthday. The minimum cash downpayment you need to put down is 10% of the house value.
The LTV limit drops even further if you already have an outstanding housing loan.
If a shell company is borrowing to purchase a house, the LTV limit is 15%.
Other rules and limits for housing loans
The loan tenure refers to the time taken by the borrower to repay the loan and the interest. According to MAS, the maximum loan tenure for housing loans is capped as below:
- 30 years for HDB flats
- 35 years for other properties
Mortgage Servicing Ratio
The mortgage servicing ratio (MSR) refers to the proportion of a borrower’s income that goes towards repaying property loans. MSR is capped at 30% of the borrower’s gross income. It applies to loans for purchasing a HDB flat or executive condominium where the minimum occupation period has not expired.
Total Debt Servicing Ratio
The total debt servicing ratio (TDSR) is the portion of a borrower's gross income that goes toward settling debts. It should be less than or equal to 55%.
Discounts, rebates or benefits when calculating the value of a property
When calculating the price of a property, financial institutions are mandated to deduct any discounts, rebates, and any other benefits offered. This may include the following:
- Payment of valuation fees
- A deferred payment scheme for completed private properties
- Payment of legal or stamp fees for the purchase
Factors that may affect your LTV limit
In this section, we take you through the key factors that determine the LTV limit you can access.
As mentioned, the loan tenure is set at 30 years for HDB flats and 35 for non-HDB properties. The longer the tenure, i.e., if the tenure exceeds 30 years for private properties or 25 years for HDB flats, the lower the LTV limit. This means you need to raise more cash for the downpayment.
The borrower's age determines the loan tenure. If the loan tenure extends beyond the borrower turning 65, the LTV limit is lowered. Again, a lower LTV means you will need to raise more downpayment.
The number of existing house loans
The number of home loans you are servicing determines the LTV limit that you get for your next housing loan. If you have two or more, the LTV limit is lower as compared to one loan. Here is a summary of the LTV based on the number of loans you currently hold.
|Housing loans||LTV limit|
|None||75% or 55%, or 80% if you opt for a HDB loan|
|1||45% or 25%|
|2 or more||35% or 15%|
Singapore's best home loan rates
In this section, we highlight some of the different loans and rates available.
Loan terms you should know
When comparing home loans, here are some of the terms you will come across, and that you would benefit from understanding:
- Fixed-rate home loans
The type of home loan where interest remains unchanged during the duration of the mortgage.
- Adjustable-rate home loans
The interest rate on these kinds of home loans changes over time.
SIBOR stands for Singapore Interbank Offered Rate. It sets the benchmark for rates at which banks can borrow money from each other.
HSBC Home Loan
HSBC gives you the option to choose the kind of rate you want. They offer a fixed rate, a SIBOR-pegged rate, or a time deposit-pegged mortgage rate. The good thing about this loan is that you can reduce it by offsetting it with the interest earned on your current account.
What’s more, you get 24 hours of emergency home assistance relating to electrical, air conditioning, plumbing, locksmith, and other services. You get a reimbursement of S$150 for these up to five times a year.
Standard Chartered Home Suite
You can get up to 75% in financing. If you are buying a private property, you can reduce the home loan interest with MortgageOne, where interest earned on your deposits is used to offset your loan interest. Excess interest earned will be used to reduce the outstanding loan principal.
Standard Chartered offers you a lock-in period if you purchase a completed property. However, there is no lock-in period if you opt for a house under construction.
The CIMB Private Property or HDB loan gives you two kinds of interest to choose from. You have a choice between the fixed rate and the SIBOR-pegged rate. You can access an LTV of 75% and a loan tenure of 35 years or until 70 years of age, whichever is earlier.
With an income of more than S$24,000, you can access a minimum loan amount of $200,000. An advantage of this loan is that there are no charges if you choose to make partial prepayments.
Citibank Home Saver
The team at Citibank promises to approve your home loan in one business day and offers a legal subsidy of up to 0.2% of the loan amount (or S$2,500, whichever is lower) when you refinance your loan. In addition, they offer you the flexibility to switch between 1-month and 3-month SIBOR tenures.
Maybank Home Loan
Maybank provides you with the option of a fixed or floating rate package. When you apply for a home loan, you will be eligible for a home renovation package at 2.88% per annum as well as a legal subsidy when refinancing your mortgage.
Home loans help to place property ownership within your reach. To make your dream of owning a property come true, choose from these best home loans.
Read these next:
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Guide To Calculating A Bridging Loan
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