Since the introduction of the Total Debt Servicing Ratio (TDSR) framework for property loans by the Monetary Authority of Singapore (MAS), which came into effect from the 29th of June 2013, the maximum Loan to Value (LTV) that can be borrowed is 90% (100% mortgage loans are currently not available in Singapore). LTV is a term that describes the housing loan quantum a bank or financial institution will offer as a percentage to the valuation of the property in question.
The MAS has also put in place curbs on the tenor of home loans – 30 years for HDB flats and 35 years for private properties. We will try and explore a few pointers to determine how you can get the maximum mortgage loan possible:
Be a first-time buyer
The maximum LTV can be drawn down only by first-time individual buyers or for those who do not have outstanding home loans. Non-individual borrowers can obtain up to 20% of the LTV. For individuals obtaining a second housing loan, the LTV limits will be lowered to 50% or 30% if the loan tenor exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65.
Ensure that your TDSR is within prescribed limits
The TDSR is the ratio of your income and liabilities. The MAS has capped TDSR on property loans to 60% (this can be relaxed only in exceptional cases). This means that your consolidated debt repayments including your home loan repayment, car loans, renovation loans, study loans, credit card loans and other secured or unsecured loans cannot exceed 60%. And, incomes that include variable components are subject to prescribed haircuts before TDSR is applied. Ensure that the quantum of amount you are looking for falls within your TDSR limits.
Know loan and tenor caps (for first-time buyers and those with no outstanding home loans)
HDB Flat with a HDB loan – You can borrow up to 90% of the value of the home and use your CPF savings to pay off the 10% down payment provided the loan tenor is capped at 25 years.
HDB Flat with a bank loan – You can borrow up to 80% of the value of your home and use your CPF to pay 15% of the remaining and pay the other 5% in cash; loan tenors are longer at 30 years.
Furthermore, buyers of resale HDB flats have to fork out an additional COV (cash over value), which can amount to as much as $50,000, and has to be paid out to the seller in cash.
Private properties – Loans are available from banks; if the tenor does not exceed 30 years and the loan does not extend beyond 65 years, an LTV of up to 80% can be obtained; 5% of the remaining to be paid in cash and the remaining can be paid with CPF savings. If the loan tenor exceeds 30 years or if the loan extends beyond 65 years, only 60% LTV can be obtained.
Refinancing
100% refinancing options are available (examples include refinancing packages from OCBC). But, refinancing will also have to comply with the MAS’s curbs on loan tenor. Lets assume that you’ve had a HDB home loan package for 14 years at Bank 1. When you refinance into a new one at Bank 2, the maximum loan tenor for the refinanced package would be 16 years (30-14). This would apply even if you had a longer loan tenor (say 40 years) before.
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