Before taking out a car loan, mortgage, renovation loan, or personal loan, check the loan curbs to know how much you can borrow.
The Monetary Authority of Singapore (MAS) currently limits how much you can borrow to 12 times your monthly income. This is to ensure that Singaporeans don’t over-borrow and suffer from financial difficulties, which could have negative effects on the overall economy.
Here are some other loan curbs you should know about, so you can determine how much you can borrow and how much you need to pay in cash.
Home Loans: 55% to 90% of the Property Value or Selling Price
The maximum loan you can take for your house depends on whether you’re using an HDB Concessionary Loan or a private bank loan.
For HDB Concessionary Loans (only for HDB flats, excluding Executive Condominiums), you can borrow up to 90% of the flat’s value or the selling price, whichever is lower.
For private bank loans, you can borrow up to 75% of the property value or selling price, whichever is lower. You can use private bank loans to fund your purchase of a HDB flat, Executive Condominium, or private property.
For example, say you are buying a 5-room resale flat that is valued at S$550,000. The flat’s owner is selling it at S$600,000. The S$50,000 above valuation is referred to as the Cash Over Value (COV).
- Valuation: S$550,000
- Seller's asking price: S$600,000
- COV: S$50,000
Using an HDB Concessionary Loan, you would be able to borrow up to S$495,000 for the flat (90% of S$550,000). The remaining 10% (S$55,000) can be paid with cash, your CPF funds, or a combination of the two, but the COV of S$50,000 must be paid in cash.
This is why it is important to take note of your COV because that amount will always have to be paid for in cash.
If you opt for a private bank loan instead, you will only be able to borrow up to S$412,500 for the flat (75% of S$550,000). 20% of the remaining can be paid with cash, your CPF funds, or a combination of the two, but at least 5% of the property valuation must be paid for in cash.
In this example, 5% of S$550,000 is S$27,500 + the COV of S$50,000 = a total of S$77,500 to prepare in cash.
|Maximum Loan Amount||To be paid in cash and/or CPF OA||Compulsory cash payment|
|HDB Concessionary Loan||S$495,000||S$55,000||S$50,000|
|Private bank loan||S$412,500||S$110,000||S$77,500|
There are many other factors that will determine how much you can borrow for your home loan. Read more here: How Much Can You Borrow For Your Home Loan?
Car Loans: 60% or 70% of the Car’s Open Market Value
Car loans are capped based on the Open Market Value (OMV) of the vehicle. For cars with an OMV of S$20,000 or below, the loan quantum is capped at 70% of the total price of the vehicle (this includes the Certificate of Entitlement (COE) and all other taxes). For cars with OMV above $20,000, the loan quantum is capped at 60%.
For example, say you are buying a Toyota Altis (1.6 litre). The OMV of this car is S$18,900. After adding in all the taxes, such as the registration fees and the COE, the total price of the car would be about S$87,000.
The loan cap would be 70%, so you can borrow up to S$60,900 and you’d need $26,100 in cash as downpayment.
The maximum tenure of a car loan is 7 years.
Unsecured Loans: Up to 12 Times Your Monthly Income
The term “unsecured loan” refers to any loan for which there is no collateral (i.e. there is nothing for the bank to size or foreclose on if you don’t repay it). Unsecured loans include, but are not limited to:
- Credit card loans
- Credit lines
- Personal loans (whether instalment-based or variable repayment)
- Education loans
- Renovation and furnishing loans
Most individual credit cards and credit lines restrict your loans to either two or four times your monthly income (depending on the policy of the issuing bank).
The total amount of unsecured loans you can have, across all your credit cards, credit lines, personal loans, etc., is capped at 18 times your monthly income. Any further attempts to borrow will automatically be declined. As of 1 June 2019, this limit has been reduced from 18 to 12 times your monthly income.
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Renovation and Furnishing Loans: Up to 6 Times Your Monthly Income
Need some major work done on your house? An easy way to do this is to use a renovation loan. Renovation loans are limited to 6 times your monthly income or S$30,000, whichever is lower. Take note that there’s usually a minimum loan amount as well, usually S$10,000.
For furnishing loans (e.g. buying new beds, tables, lamps, and so forth), the cap is 6 months your monthly income. Note that renovation loans and furnishing loans are two separate loans. So yes, you can borrow S$30,000 for the renovation loan, and then another furnishing loan afterwards of up to 6 months of your income. Ask your bank about this.
Loan tenures are usually capped at 5 years.
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