What Does Loan To Value Mean When Buying A House?
Loan-to-value (LTV) ratio is commonly used by banks in Singapore to express the percentage of a loan to the value of the property.
The following housing loan table (w.e.f. 6th July 2018) is for your easy reference.
| Housing Loan | 1st Home Loan | 2nd Home Loan | 3rd Home Loan | |||||||
| Loan Tenure | Up To 30 Years | 31-35 Years | Up To 30 Years | 31-35 Years | Up To 30 Years | 31-35 Years | ||||
| Sum of Tenure & Age of Borrower | Up To 65 | Above 65 | Up To 65 | Above 65 | Up To 65 | Above 65 | ||||
| LTV Limit (Individual) |
75% | 55% | 55% | 45% | 25% | 25% | 35% | 15% | 15% | |
| Cash Outlay | 5% | 10% | 10% | 25% | 25% | 25% | 25% | 25% | 25% | |
| LTV Limit (Non-Individual) |
15% | 15% | 15% | |||||||
| Mortgage Servicing Ratio (MSR) | 30% | |||||||||
| Total Debt Servicing Ratio (TDSR) | 60% | |||||||||
| Stress Test Interest Rate | 3.50% | |||||||||
To illustrate, refer to the “1st Home Loan”.
Let’s say, you would like to buy a private residential property (e.g. new launch condo), and you would like to take your 1st home loan from the bank.
- The loan tenure, the sum of loan tenure and the age of the borrowers, will affect the Loan-to-value (LTV) ratio, as well as the cash downpayment required for the purchase.
- The financial institutions in Singapore have now standardised the calculation of the age of the borrowers.
- The 60% TDSR and 30% MSR will be applicable.
- How much housing loan the financial institutions will offer you ultimately depends on your income and financial commitments.
- The total of your new home loan repayments and your existing debt obligations must not exceed the limit.
To take a housing loan, you must have:
- Sufficient income to qualify for a loan.
- Steady income to pay back the housing loan with interest over 20 to 30 years.
You are encouraged to explore the different housing loan packages offered by various banks. Do read through the terms and conditions for the different housing loans provided by banks and keep in mind that interest rate that may increase over the years.
