The maximum LTV ratio is not guaranteed
As mentioned above, the maximum LTV for an HDB loan is 80%, whereas the maximum LTV for a bank loan is 75%. However, HDB and the banks are not required to give you the maximum LTV. They can choose to lower the LTV if they feel it would be appropriate.
Some other factors that can lower your LTV include:
- Outstanding home loans
- Remaining lease on the property
- Location and state of the property
- Your age and loan tenure
- Your credit score
1. Outstanding home loans
If you have one outstanding home loan, the LTV of your second home loan is capped at 45%. Of the remaining 55% downpayment, half must be paid in cash, and the remainder can be paid in cash or via your CPF OA funds.
If you already have two outstanding home loans, and want to take a third, the LTV ratio is capped at 35%.
Do note that these LTV ratios quoted above are only eligible for loans with a loan tenure of 30 years or less. If the loan exceeds the age limit of 65 or has a tenure longer than 30 years (or 25 years for HDB), the LTV can fall even lower. See points 4 and 5 for more information.
2. Remaining lease on the property
For properties that only have 36 to 40 years left on the lease, the maximum LTV is often capped at 60%. However, you can still pay up to 15% of the property price or value (whichever is lower) with your CPF.
For properties with 35 years or less on the lease, home loans are usually not possible. In addition, you cannot use your CPF funds for properties with 30 years or fewer on the lease.
You may have read about such properties being purchased through monthly repayments. This is often the case when a buyer has negotiated a private contract with the seller via a law firm. Alternatively, it may be a special loan for wealthy buyers, who have a high net worth and access to private banking facilities.
3. Location and state of the property
The LTV limit can decrease significantly based on the location and state of the property. For example, properties located abroad or in especially undesirable locations may cause you to receive a lower LTV limit.
Properties that are run down or have major defects (e.g. a condominium in which residents are currently suing developers for defects) may also cause lenders to offer a lower LTV.
4. Your personal age and loan tenure
As of 6 July 2018, the LTV for private properties will be capped at 55% if the loan tenure exceeds 30 years or if the loan tenure plus your age extends beyond 65. For an HDB flat, the LTV will be capped at 55% if the loan tenure exceeds 25 years or if the loan tenure plus your age extends beyond 65.
This means that if you're taking out a private home loan at 35, you'll have to ensure that you repay your full loan amount before you turn 65 to enjoy the higher LTV of 75%.
If you also have outstanding home loans (see point 1), the LTV can fall even lower to 25%.
5. Your credit score
During the home loan application process, lenders will check your credit score. If you have a history of late or non-payment on loans, you could be identified as a credit risk. Banks may then offer you a lower LTV than the allowable limit. For example, an LTV of 65% instead of the maximum 75%.
To prevent this, be sure to always repay your loans on time; regardless of whether they are home loans, credit card loans, personal loans, or others. Even an unpaid loan from 10 years ago could affect your LTV.
Now that you know what the factors influencing your home loan limits are, you can better plan for your next property purchase. Don't forget to compare home loans to get the best rates!
Buying your first home soon? Then you'll want to compare and apply for a low interest rate home loan on SingSaver. What's more, you stand to get rewarded* with cash and prizes!
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How Some Singaporeans Buy A House Without The Bank's Help
How Do HDB Home Loans Work?
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5 Renovation Tips To Maximise The Value of Your First Home