According to a 2022 OCBC survey, 40% of homeowners struggled to repay their loans, up from 31% the previous year. This highlights the need to borrow only what you can afford. While taking a 75% mortgage loan is common, it’s not mandatory.
Your borrowing capacity depends on income, existing debts, and the property’s value. For HDB flats, the maximum loan is typically up to 80% of the purchase price or value, whichever is lower. The monthly installments are also capped at 30% of the borrower’s monthly income. This helps prevent financial overextension.
This article explains key factors influencing your home loan amount, including the Total Debt Servicing Ratio (TDSR), Mortgage Servicing Ratio (MSR), and Loan-to-Value (LTV) ratio.
Key Factors Influencing Home Loan Amount
The Total Debt Servicing Ratio (TDSR) is a critical metric set by the Monetary Authority of Singapore (MAS). It indicates the proportion of your gross monthly income used to pay all your monthly debt payments. This means if you have other debt obligations like credit cards or a car loan, it can affect your TDSR. All obligations should not exceed the TDSR threshold of 60%.
The TDSR aims to ensure that borrowers do not overextend themselves financially, promoting long-term sustainability in the property market.
What is the Cap for TDSR?
According to MAS regulations, a borrower’s TDSR should be less than or equal to 55% of their gross monthly income. This cap includes all existing debts, such as credit card balances, car loans, and personal loans, ensuring that borrowers maintain a manageable debt load.
How to Calculate TDSR?
The TDSR is calculated using the following formula:
TDSR = All Monthly Debt Repayments / Gross Monthly Income × 100%
To illustrate, if a borrower has a gross monthly income of S$10,000 and total monthly debt obligations amounting to S$5,500, their TDSR would be:
TDSR = (S$5,500 / S$10,000) × 100% = 55%
This means that the borrower’s monthly debt repayments account for 55% of their gross monthly income, which is within the permissible limit set by MAS.
Example computation for TDSR
Fixed Income:
Jen earns a fixed income of S$8,000 per month. The sum of her credit card, car loan, and personal loan repayments is S$3,200 per month.
TDSR = (Total monthly debt obligations) / (Gross monthly income)
TDSR = S$3,200 / S$8,000 = 40%
Her TDSR threshold is $4,400 (55% of S$8,000).
If Jen wants to apply for a property loan, the maximum repayment she can make each month will be S$1,200 (S$4,400 – S$3,200) under the TDSR rules. If she wants a larger loan, she’ll need to pay off her outstanding debts.
Variable Income:
Jamie earns a fixed income of S$6,500 per month plus rental income of S$2,500 per month. His variable income is subject to a 30% ‘haircut’, so his gross monthly income is S$8,250 (S$6,500 + S$1,750). His existing debt obligations come up to S$3,900.
TDSR = (Total monthly debt obligations) / (Gross monthly income)
TDSR = S$3,900 / S$8,250 = 47%
*Note: FIs are required to apply a minimum haircut of 30% to variable income and rental income.
Joint Applications:
Taylor has a fixed income of S$3,000 per month and debt repayments of S$1,200. Her partner’s gross monthly income is S$4,800 and his debt repayments total S$2,500.
TDSR = (Total monthly debt obligations) / (Gross monthly income)
TDSR = S$3,700 / S$7,800 = 47%
The Mortgage Servicing Ratio (MSR) indicates the proportion of your gross monthly income that is used to service your mortgage loan. This ratio is particularly important for those seeking loans to purchase HDB flats or executive condominiums (ECs) that are still within the minimum occupation period.
The MSR rule applies specifically to housing loans for the purchase of HDB flats and executive condominiums where the minimum occupation period has not expired. This regulation is crucial in maintaining financial stability for homeowners, ensuring that they are not overburdened by their mortgage commitments.
What is the Cap for MSR?
The MSR is capped at 30% of a borrower’s gross monthly income. This means that the total monthly repayments for all property loans must not exceed 30% of the borrower’s gross monthly income. This cap is designed to ensure that borrowers do not overextend themselves financially and can comfortably manage their monthly loan repayments.
How to Calculate for MSR?
Calculating MSR To calculate the MSR, financial institutions consider:
- All of the borrower’s property loans.
- At least 20% of the monthly debt obligation for any property loan where the borrower is a guarantor.
The formula for calculating the MSR is as follows:
MSR = Monthly Mortgage Repayment / Gross Monthly Income x 100%
For instance, if a borrower has a gross monthly income of S$8,000 and monthly repayment instalments for property loans amounting to S$2,400, their MSR would be:
MSR = (Monthly repayment instalments for all property loans / Gross monthly income) x 100%
MSR = (S$2,400 / S$8,000) x 100% = 30%
This indicates that the borrower’s property loan repayments take up 30% of their gross monthly income, which is within the permissible limit set by the MSR guidelines.
The Loan-to-Value (LTV) ratio determines the maximum amount an individual can borrow from a financial institution (FI) for a housing loan, expressed as a percentage of the property’s value. This is granted after considering the following factors:
- All existing debts and credit
- Mortgage loan term
- Monthly repayment amount in proportion to gross monthly income
- Any discount, rebate or other benefits given
LTV = Loan amount / The Property’s Purchase Price
What is the Maximum LTV for HDB Loans?
The LTV for HDB housing loans, specifically the HDB Concessionary Loan, is capped at 80%. This means that eligible buyers can borrow up to 80% of the purchase price or property value for HDB flats. The downpayment for HDB loans can be made using cash, available savings in the CPF Ordinary Account (OA), or a combination of both, with no minimum cash component required.
What is the Typical LTV for Bank Loans?
For bank loans, the maximum LTV ratio is generally capped at 75% for the first housing loan, provided there are no outstanding home loans. This was adjusted from the previous 80% limit as part of the property cooling measures introduced in July 2018.
Of the remaining 25%, at least 5% must be paid in cash, while the rest can be paid using a combination of cash and CPF-OA savings. The LTV limits are further reduced for borrowers with one or more existing housing loans.
What are LTV Limits and Minimum Downpayment for Individuals?
The LTV limits for individuals can vary depending on the number of outstanding housing loans they have:
| Number of Outstanding Loans | LTV Limit | Minimum Cash Downpayment |
| None | 75% or 55% | – 5% for LTV of 75% |
| – 10% for LTV of 55% | ||
| One | 45% or 25% | 25% |
| Two or More | 35% or 15% | 25% |
(Table from: Monetary Authority of Singapore)
Best Home Loans
Finding the best home loan can be crucial for securing your dream home. Here, we’ve compiled a list of top home loan options from various banks in Singapore.
| Banks | Min. Loan Amount | Loan amount |
| DBS/POSB Home Loan | S$100,000 | Up to 70% financing |
| Standard Chartered HDB Home Suite | S$100,000 | Up to 70% financing |
| Standard Chartered Home Suite | S$100,000 | Up to 70% financing |
| UOB HDB Home Loan | S$250,000 | Up to 70% financing |
| UOB Go Green Home Loan | S$250,000 | Up to 70% financing |
| CIMB HDB Home Loan | S$100,000 | Up to 75% financing |
| CIMB Private Property Loan | S$200,000 | Up to 75% financing |
| OCBC Home Loan | S$300,000 for private home
S$200,000 for HDB flat |
up to 75% of your property’s valuation. |
| Maybank Home Loan | S$300,000 | up to 75% of your property’s valuation. |
Best Fixed Home Loans for HDB Flats
Discover the leading fixed-rate home loan options for HDB flats, providing stability and consistent monthly payments.
| Banks | First Year Interest Rate | Lock-in Period |
| DBS/POSB | NA | NA |
| DBS Bridging Loan | 4.25% p.a. | NA |
| UOB | NA | NA |
| CIMB | NA | NA |
| OCBC | NA | NA |
| Maybank | 3.30% p.a. | 2 years |
| Maybank | 3.75% p.a. | 3 years |
Best Fixed-Rate Home Loans for Private Property
Here are some top options from various banks in Singapore, detailing their first-year interest rates and lock-in periods to help you make an informed decision.
| Banks | First Year Interest Rate | Lock-in Period |
| DBS/POSB | NA | NA |
| DBS Bridging Loan | 4.25% p.a. | NA |
| UOB | NA | NA |
| CIMB | NA | NA |
| OCBC | NA | NA |
| Maybank | 3.30% p.a. | 2 years |
| Maybank | 3.75% p.a. | 3 years |
Best Floating Rate Home Loans for HDB Flats
These options are ideal for those who want to benefit from lower rates when available, potentially reducing monthly payments over time.
| Banks | First Year Interest Rate | Lock-in Period |
| DBS/POSB Two-In-One Loan 3M SORA | 3.6478% + 0.75% p.a. | 2 years |
| DBS Bridging Loan | 4.25% p.a. | NA |
| Standard Chartered 3M SORA | 3.6478% | Not disclosed |
| UOB 3M SORA | 3.6478% + 0.80% p.a. | 3 years |
| CIMB 3M SORA | 3.6478% + 1.30% p.a. | 3 years |
| OCBC 3M SORA | 3.6478% + 0.65% p.a. | 2 years |
| Maybank 1M SORA | 3.6739% + 0.80% p.a. | 2 years |
Top Floating-Rate Home Loans for Private Property
Here are some top options from various banks in Singapore, detailing their first-year interest rates and lock-in periods
| Banks | First Year Interest Rate | Lock-in Period |
| DBS/POSB Two-In-One Loan 3M SORA | 3.6478% + 0.75% p.a. | 2 years |
| DBS Bridging Loan | 4.25% p.a. | NA |
| UOB 3M SORA
(promotional limited tranche for New Direct-to-Bank customers only) |
3.6478% + 0.70% p.a. | 2 years |
| CIMB Private Property Loan | Not disclosed | Not disclosed |
| OCBC 3M SORA | 3.6478% + 0.65% p.a. | 2 years |
| Maybank 1M SORA | 3.6739% + 0.80% p.a. | 2 years |
Which is the Best Option?
When considering the best fixed-rate home loans for HDB flats, the Maybank Home Loan stands out with a first-year interest rate of 3.30% per annum and a lock-in period of 2 years. This loan is also a top choice for private property buyers, offering the same competitive rate and lock-in period.
For floating-rate home loans, the OCBC Home Loan is a leading option for both HDB flats and private properties. It offers a first-year interest rate of 3M SORA 3.6478% plus 0.65% per annum, with a lock-in period of 2 years.
These loan options provide competitive rates and reasonable lock-in periods, making them suitable choices for both HDB and private property buyers seeking stability and potential cost savings.
HDB Loans vs Bank Loans
When deciding between HDB loans and bank loans for your property, it’s important to understand their key features.
HDB loans offer up to 90% Loan-to-Value (LTV) limit with a 10% downpayment that can be fully paid using CPF, while bank loans provide up to 70% LTV with more stringent downpayment requirements.
Both have a Mortgage Servicing Ratio of 30%, but bank loans have a Total Debt Servicing Ratio of 60%. HDB loans have a fixed interest rate pegged to CPF rates, while bank loans offer fixed or floating rates. Additionally, HDB loans can be switched to bank loans, but not vice versa, and bank loans may incur various fees.
| Feature | HDB Loan | Bank Loans |
| Loan-to-Value (LTV) limit | Up to 90% | Up to 70% |
| Downpayment | 10% can be fully paid using CPF | 5% must be paid in cash, 20% can be paid in cash or CPF (also depends on the number of property loans you have) |
| Mortgage Servicing Ratio | 30% | 30% |
| Total Debt Servicing Ratio | – | 60% |
| Interest Rate | Pegged at 0.1% above the prevailing CPF interest rate & reviewed quarterly (currently at 2.6%) | Fixed/floating (rate differs between bank loans) |
| Maximum Loan Period | Up to 25 years | Up to 30 years for HDB flat, Up to 35 years for private property |
| Loan Switch Availability | Can switch to a bank loan | Cannot switch to HDB Concessionary Loan |
| Chargeable Fees | No penalty for early repayment.
Late repayment fee of 7.5% per year, but more lenient. |
May incur early repayment fees, late repayment, management service fees, and fees for refinancing within the lock-in period. |
Should you get an HDB Loan or a Bank Loan?
The HDB Concessionary Loan is a government program, which means the borrower’s sake is kept in mind. You get a higher, but fixed interest rate and a larger quantum, making it an ideal option.However, the income ceiling might lock you out of this particular option.
Getting a home loan from a bank will have lower but fluctuating interest rates, usually have a longer loan tenure, and be less strict.
Special Considerations for Different Properties
Jumbo Flats
Jumbo flats, unique to Singapore, are HDB units formed by merging two flats, typically 3-room and 4-room units. These spacious homes, ranging from 1,442 sq ft to over 2,000 sq ft, often include at least seven rooms and balconies, appealing to multi-generational families.
Due to their size and value, jumbo flats require higher loan amounts. However, they remain affordable alternatives to private properties, with HDB offering a loan-to-value (LTV) ratio of up to 90%, reducing the upfront payment needed. This makes them a cost-effective option for those seeking more space without the high cost of private properties.
Recognizing the value of jumbo flats, banks in Singapore offer financing options of at least S$1 million, ensuring buyers can manage the purchase without financial strain.
Step-by-Step Guide to Applying for a Home Loan
-
Determine Your Eligibility
Before diving into the application process, it’s essential to ensure that you meet the eligibility criteria for an HDB loan. Verify your income ceiling based on the type and size of the flat you wish to purchase. For instance, the income limits are:
- $14,000 for families
- $21,000 for extended families
- $7,000 for singles purchasing under the Single Singapore Citizen (SSC) Scheme
You can check out the full details here.
-
Prepare Necessary Documentation
Gather all the required documents, including:
- Proof of identity
- Proof of income
- Citizenship
- Information about your family nucleus. This documentation will be necessary for both the HFE letter application and the loan application process.
-
Apply for an HFE Letter
The HFE letter provides upfront information on buyers’ eligibility for purchasing new or resale flats, CPF housing grants, and HDB housing loans, including the respective grant and loan amounts.
Here is the application process:
-
Complete Preliminary HFE Check
- Log in to the HDB Flat Portal using your Singpass.
- Provide particulars of all flat applicants and occupiers.
- Declare any interest in local and/or overseas private property.
- Indicate whether you intend to take a housing loan.
-
Apply for an HFE Letter
- Select your housing loan option(s) within 30 days of completing the preliminary HFE check.
- Compare housing loan packages offered by HDB and participating financial institutions (FIs).
- Confirm your eligibility for an HDB housing loan or apply for an In-Principle Approval (IPA) for a housing loan from FIs.
- Provide all required information before the due date.
- Review and confirm application details.
-
Get Your Results
- Within 21 working days of receiving the completed application, HDB will issue the HFE letter. This letter will outline your eligibility for purchasing a new or resale flat, as well as the CPF housing grants and HDB housing loan amounts you qualify for.
- Applicants will receive an SMS notification when their HFE letter is ready, and it can be accessed via the HDB Flat Portal.
-
Review and Compare Loan Options
Once you have your HFE letter, compare the benefits and terms of HDB loans versus bank loans to decide which option suits your financial situation best. Consider factors such as interest rates, loan tenure, and repayment flexibility.
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Submit Loan Application
- For HDB Loans: Apply directly through the HDB portal.
- For Bank Loans: Approach your preferred financial institutions to apply.
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Receive Approval and Secure Your Loan
After your loan application is approved, secure your loan and proceed with the purchase of your BTO or resale flat. Ensure that all necessary paperwork is completed and submitted to finalize the loan agreement.
Closing
Understanding the factors influencing your borrowing capacity for a home loan is crucial for financial planning. Key metrics like TDSR, MSR, and LTV ratios prevent borrowers from overextending themselves, ensuring long-term market stability.
Key takeaways:
- The Total Debt Servicing Ratio (TDSR) cap is 55% of your gross monthly income, ensuring you don’t overextend yourself financially.
- The Mortgage Servicing Ratio (MSR) for HDB flats and executive condominiums is capped at 30% of your gross monthly income.
- The Loan-to-Value (LTV) ratio for HDB loans can be up to 80%, while for bank loans, it’s typically up to 75%.
Quickly and easily compare the best loan options in Singapore with Instant Loan. As your one-stop loan comparison tool, it helps you find the perfect loan tailored to your needs with just a tap of a button. Request a quote today!
