Singaporeans who’d like to purchase a property are given a Loan-to-Value limit (LTV) of up to 75% for bank loans and up to 90% for HDB loans. To simplify, LTV is the maximum amount an individual can borrow for a home loan based on the property’s value. The ideal scenario is, every homebuyer gets to borrow the maximum amount possible to minimise the immediate strain on their cashflow or financial reserves. However, that is not always the case.
Whether you’re a new homebuyer or you’re planning to buy an additional property, this article explains the common reasons why not everyone is granted a full LTV ratio. At the same time, this guide covers how you can increase your LTV, and how you may appeal with the bank to lend you more for your home loan.
3 Reasons Why You May Not Be Able to Get the Full LTV
Here are the common reasons why not everyone gets to borrow the full 75% LTV for banks and 90% LTV for HDB:
1. Age and Loan Tenure
Age is a crucial factor when calculating the loan tenure which also affects the LTV. If the end of your target loan tenure exceeds 30 years for banks and 25 years for HDB, or if it goes beyond age 65, the LTV or the amount you can borrow will be limited to 55% of the property value.
Therefore, if you’re applying for a loan at age 35, you have to see to that that you’ll be able to pay off your loan or set the loan tenure before you turn 65 to increase your chances of enjoying a full 75% LTV.
2. Outstanding Mortgages
If you have one outstanding mortgage, you can only borrow up to 45% for your second home loan. In other words, the remaining 55% would be out of your own pocket. The cash downpayment portion is 25% of the whole purchase price, and what’s left (30%) can be paid using your CPF OA.
On the other hand, if you have two outstanding home loans, you’ll only be able to borrow up to 35% of the purchased property price for your third home loan.
It’s also good to note that these LTV limits will only apply if your loan tenure is 30 years or less. If your loan tenure ends after age 65 or is longer than 30 years for banks and 25 years for HDB, your LTV will be even less (capped at 25% for a second loan or 15% for a third loan).
3. TDSR and MSR Limitations
When applying for a home loan in Singapore, the amount you can pay per month (and hence ultimately your total budget) is limited by your Total Debt Servicing Ratio (TDSR). This is the maximum percentage of your gross monthly income that you spend on paying for any type of debt, including the home loan you’re applying for. In Singapore, the maximum TDSR is 60%, so you can spend no more than 60% of your income on all debts.
If you are applying for an HDB flat or Executive Condo (EC), then the lender will additionally also take your Mortgage Servicing Ratio (MSR) into consideration. The MSR is capped at 30% of monthly income, so even if you have no debts and you have a full 60% TDSR available to use on instalments, you can only use half of it to service your mortgage.
Your LTV will be limited by whichever of these applicable ratios are smaller. So if you have spent 50% of your income on other loans (10% TDSR remaining), it doesn’t matter if you have no outstanding home loans and your available MSR is 30% – you will only be allowed to pay a monthly instalment that comes up to 10% of your income, resulting in a longer loan tenure.
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How to Increase the Amount of Your Home Loan
The following are some ways that can help you borrow more money for your home loan. At the end of the day, the amount you can borrow would still depend on the bank or HDB, and is subject to the prevailing laws (like the LTV, TDSR and MSR) set by the Monetary Authority of Singapore (MAS).
1. Increase Your LTV
If, based on the information above, you’ve realised that you wouldn’t be able to get the 75% LTV whether it’s because of an outstanding mortgage, your age, or your loan tenure, here’s what you can do:
Settle Your Outstanding Mortgage(s)
If you have an existing home loan, the best way to work your way around is to pay for your loan balance. This could take more time, especially if you have a limited cash flow. But it could be worth the wait, especially if you don’t want to shell out at least 55% of the property value.
Other strategies you can do to pay off your outstanding mortgage as early as possible include limiting your expenses, getting a side hustle, withdrawing some of your investments (if any), and more.
Get A Younger Joint Borrower
If your limitation is age-related, getting a younger joint borrower could help solve the problem. How this works is, the lender will get the income-weighted average of both your age and the younger joint borrower’s age to lower the actual borrower age. The lender would also ask for your gross monthly incomes as they would need this to calculate the income weighted average age (IWAA).
The only premise here is that, legally, the joint borrower would become a co-owner of your property. Therefore, you have to ensure that the person you’ll get on board is a trustworthy person such as a close family member or a friend.
Don’t Go Over the TDSR Limits Or Apply For A Longer Tenure.
To keep your TDSR below the limit, be sure to pay off your credit card debts on time, and try to pay off a huge chunk of your other loans (i.e., car loan, student loan, etc.) earlier.
You can also apply for a longer loan tenure to keep your monthly repayment loans, provided that they wouldn’t exceed 30 years or 65 years of age.
2. Convince Banks to Lend You More
Some other strategies that can help you convince banks to lend you more for your home loan include:
Improve Your Credit Rating
Having a poor credit rating can affect your home loan application. If this applies to you, don’t lose hope. You can still improve your credit score by settling all credit card dues, avoiding big purchases (or avowing of using your credit card at all), and not applying for additional credit cards.
Have A Fixed Income
When it comes to bank loans, having a fixed income is preferable. If you’re self-employed, even if you consider your income to be stable, a 30% will still be applied (i.e., they will only consider 70% of your income).
To get around this, you can either find a job with a fixed income, or find ways to increase your self-employed income and ensure that you have declared all passive or investment income to increase the income taken into consideration by the bank.
Pledge Collateral or ‘Show Funds’
Another strategy you can consider, although you have to think carefully on this one, is to pledge a collateral or a certain asset to the bank as a security for lending you more. Pledged collaterals may vary from the borrower’s savings account to a real estate investment to equity, bonds, stocks, or other securities. Collateral can help convince the bank to lend you more – but be wary of overstretching yourself, since it will mean you will forfeit that collateral if you cannot complete your instalments.
Alternatively, if you have a lot of savings stashed somewhere, you can also ‘show funds’ to the bank to prove that you indeed have the financial capability to take on the loan. Banks typically apply a haircut on the funds shown though (i.e., they do not consider the full amount).
Need More Help Securing Your Home Loan?
We hope this article has given you more tips about borrowing more for your home loan. Yet, as mentioned, at the end of the day, the amount that will be granted to you is still at the bank or HDB’s discretion.
If you want to have a better understanding, or if you need help in exploring your mortgage options and affordability, PropertyGuru Finance’s home loan advisors are here to help. All you need to do is to reach out to get started.
Disclaimer: Information provided on this website is general in nature and does not constitute financial advice.PropertyGuru will endeavour to update the website as needed. However, information can change without notice and we do not guarantee the accuracy of information on the website, including information provided by third parties, at any particular time. Whilst every effort has been made to ensure that the information provided is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial planner or your bank to take into account your particular financial situation and individual needs. PropertyGuru does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this website. Except insofar as any liability under statute cannot be excluded, PropertyGuru, its employees do not accept any liability for any error or omission on this web site or for any resulting loss or damage suffered by the recipient or any other person.
More FAQs on Borrowing More for Your Home Loan
How Can I Borrow More Money on My Home Loan?
You can increase your Loan-to-Value (LTV) by settling any outstanding mortgages, keeping within the Total Debt Servicing Ratio limits, and applying for a longer loan tenure. You can also appeal to the lender by improving your credit rating, pledging collateral, showing proof of funds and having a fixed income.
What is Loan-to-Value (LTV)?
The LTV is a mandated limit that limits how much you can borrow for your home loan. Currently, it is up to 75% for bank loans and 90% for HDB loans.
Why Did I Not Get The Full LTV?
There are many reasons, and it’s best to check with your lender. Common reasons include having outstanding mortgages and failing other requirements such as borrower’s age and other debt servicing ratios.
How is LTV Calculated?
The Loan-to-Value (LTV) is calculated as a percentage of the property’s price or value. For example, a 75% LTV for a property selling at or valued at $1 million means you can only borrow up to $750,000.