Purchasing a property is one of the biggest and most important financial decisions anybody can make – which is why getting the right home loan is absolutely essential. Here in Singapore, borrowers are spoilt for choice, with bank loans, traditional mortgage loan deals, personal loans, and plenty of other financial products available to those who want to get on the property ladder or move house.
From calculating your mortgage servicing ratio, stamp duty, and debt obligations over the course of the loan to choosing the right loan tenure and Loan to Value Ratio to suit your needs, there’s an awful lot to think about when getting a home loan. Let’s take a look at how home loan limits generally work.
How Much Can I Borrow? Home Loan Borrowing Made Easy.
Buying a home is one of the biggest financial decisions you can make. Whether it’s your first property, an HDB flat, or you’re putting money into multiple private properties to rent out to tenants, you’ll need to closely assess how much you can realistically afford to borrow for your home loan. As well as what kind of mortgage payments and ongoing costs are realistic for you. Here are a few things to consider:
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Upfront costs
You should start by reviewing the property price or purchase price of your desired home, taking away any cash you may have saved for the downpayment, and asking yourself, “how much can I borrow?” as well as “how much can I afford to borrow?”. Your total upfront costs will usually consist of cash savings, CPF Ordinary Account savings, and any net proceeds toward the downpayment. These savings will also determine how much you are ultimately allowed to borrow in moneylender or bank loans.
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Monthly home loan instalments
There’s much more to a mortgage loan cost-wise than simply repaying the original loan amount. You should use a home loan mortgage calculator to get an idea of how much monthly repayments you can realistically afford and the various other costs, such as interest, involved. Mortgage payments will always be your main recurring cost when buying a home, and the interest rates you will pay each month can vary depending on the loan types you choose. Some home loans will offer you a lower rate during a set lock-in period, while others might offer floating rates that follow the Singapore Interbank Offered Rate (SIBOR).
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Ongoing homeownership expenses
Once you’ve thought about and decided on what kind of monthly mortgage payment you can afford, there are other factors and recurring costs you’ll also need to consider. These include mortgage insurance payments, interest rates, and maintenance costs. Shopping around and comparing the market will help you find the best home loan deals, but you’ll need to make some very prudent decisions. For example, opting for the maximum loan tenure might reduce your interest rates over the course of a moneylender or bank loan, but this will also increase your total costs throughout the full loan tenure.
What Key Factors Affect Home Loan Borrowing Limits? Total Debt Servicing Ratio and More Explained
There are a number of important factors that will affect the amount of money you are allowed to borrow for your home loan. The most important ones are:
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Mortgage Servicing Ratio MSR
When you apply for a home loan, your lender will use a Mortgage Servicing Ratio to determine your gross monthly income and figure out what kind of monthly mortgage payment you can sensibly afford. HDB loans and bank loans will typically allow a Mortgage Servicing Ratio maximum amount of 30%, but this will always vary depending on your gross monthly income.
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Total Debt Servicing Ratio TDSR
Unlike the MSR, your Total Debt Servicing Ratio TDSR covers all your monthly debt repayments rather than just mortgage payments alone. Lenders will look at any car loans, student loans, and other debt obligations you may have to determine your Total Debt Servicing Ratio TDSR before being granted a home loan. As a general rule, Singaporeans cannot borrow a home loan, resulting in their total monthly payment obligations exceeding 60% of their monthly income.
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Loan to Value Ratio LTV
Moneylenders and banks use a Loan to Value Ratio to determine the size of the home loan you’ll need in relation to its purchase price and your savings. For example, if you purchase a $500,000 home with $300,000 in savings and a $200,000 home loan, your Loan to Value Ratio is 40%. Here in Singapore, there is an upper LTV limit of 75% for bank loans and 90% for HDB loans. Your risk profile and borrowing history will always affect the lower LTV limit you are offered.
Other factors that might affect the home loan amount banks and moneylenders can offer you include:
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Outstanding debt
Including any other outstanding home loans or other financial products, you are still paying off.
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Age and loan tenure
A borrower’s age and desired loan tenure could affect the maximum loan tenure a lender can offer you, particularly if a tenure of 30 years or more is desired and the borrower is over 65.
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Credit score
A credit report will usually be carried out as part of a mortgage loan application. If you have a bad credit history, you might want to consider comparing licensed moneylenders instead of traditional banks.
How Can I Increase My Home Loan Borrowing Limit and Loan Tenure?
There are several ways you might be able to increase the lower LTV limit and total loan amount a bank or lender will offer you. In some cases, you might even be able to access a longer loan tenure, too. Here’s how:
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Put down a larger downpayment
Suppose you are able to gather together more savings or borrow money from friends or family. In that case, it’s possible to put down a larger deposit against the property value of the home you are purchasing in exchange for a lower LTV limit home loan.
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Reduce your debts
You can improve your Total Debt Servicing Ratio TDSR in the eyes of your lender by paying off or reducing any outstanding home loans or other debts you may have, including by making timely car loans and other payments.
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Improve your credit score
Boosting your credit score by keeping up with repayments on any personal loans and credit cards in good time and keeping on top of your debt obligations will lower your risk profile in the eyes of home loan lenders.
Applying for an HDB Home Loan
If you intend to purchase a HDB flat, there’s a chance you might be able to get a HDB loan. These loan types enable you to borrow up to 90% of your intended property’s purchase price for a maximum loan period of up to 25 years with no early repayment penalties. However, you will be subjected to stringent checks on:
- Your credit score
- Your monthly income
- Your all-round financial situation
- Your age and circumstances
The eligibility requirements are quite strict – at least one buyer must be a Singapore citizen who hasn’t previously taken out two or more HDB loans. The household’s income must not exceed $14,000 for families, $21,000 for extended families, and $7,000 for singles, and buyers must not have sold off any private property in the past 30 months. More information about HDB loans is available on the HDB website here.
HDB Home Loan Vs Bank Personal Loans
Let’s take a brief look at how a typical HDB loan compares to standard bank loans in terms of features and borrowing limits:
| HDB loan | Bank loan | |
| Downpayment | 10% upfront | Dependent on how many existing property loans the borrower has |
| LTV limit | Up to 90% | Up to 75% |
| MSR | 30% | 30% |
| TDSR | N/A | 60% |
| Maximum loan tenure | 25 years | 35 years for standard property (or 30 years for HDB flat) |
| Interest rate | Reviewed quarterly (0.1% above the prevailing CPF interest rate) | Fixed lock-in period or floating rates available |
| Fees | No early repayment fees | Early repayment and refinancing within an agreed lock-in period may incur fees. |
Home Loan Calculator – Sample Borrowing Scenarios
Let’s take a look at a few sample borrowing scenarios to see how they compare:
| Principal | $1,000,000 | $500,000 | $300,000 |
| Interest rate | 1% | 1.5% | 2% |
| Tenure | 35 years | 30 years | 25 years |
| Monthly payment | $2,822 | $1,726 | $1,272 |
| Total interest payment | $185,600 | $121,216 | $381,469 |
Conclusion – How Much Can I Borrow Home Loan?
From calculating monthly affordability, savings, loan, and property price ratios, what upfront costs you’ll face, and what LTV limit you might need, there’s a lot to think about when it comes to applying for a home loan – and the question is always much bigger than simply “how much can I borrow?”. The key things you’ll need to keep in mind when determining what kind of bank loan amount you can secure are:
- Your MSR, TDSR, and LTV limits
Use a mortgage calculator before applying for a home loan to figure out what you might be able to borrow.
- Your outstanding debts, your age, and your credit score
Try to pay off any outstanding home loans and other debts and improve your credit rating to be in with a better chance of borrowing more money.
- Your desired loan amount and tenure
Calculate how much you need to borrow and how long for – and don’t forget about the impact of different tenures on interest rates and overall costs.
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