What is my housing loan eligibility?

This is a very common question that people ask.

The maximum loan depends on:

• HDB Concessionary Loan or a private bank loan
• The type of property you buy
• Age of property

HDB Concessionary Loans

For HDB Concessionary Loans, you can borrow up to 90% of the flat’s value or the selling price, whichever is lower.

You can only apply for this loan if you are buying HDB flats, excluding Executive Condominiums. Also, you can apply for this type of loan only twice.

The HDB loan interest rate will be 0.1% higher than the CPF ordinary account (currently at 2.5%). Currently, the interest rate is 2.6%.

Private Bank Loans

For private bank loans, you can borrow up to 75% of the property value or selling price, whichever is lower.

You can use private bank loans to fund your purchase of any property type, including HDB.

The interest rate varies from bank to bank.

Calculation Comparison Example

• Property Value (Valuation): S$450,000
• Seller’s asking price: S$470,000
• COV: S$20,000

Example:

You are buying a 4-room resale flat that is valued at S$450,000. The flat’s owner is selling it at S$470,000. The Cash Over Value (COV) is S$20,000 ($470,000 -$450,000).

It is important to take note of your COV because that amount will always have to be paid for in cash.

Using an HDB Concessionary Loan

You will be able to borrow up to S$405,000 for the flat (90% of S$450,000). The remaining 10% (S$45,000) can be paid with cash, CPF, or a combination of the two, but the COV of S$20,000 must be paid in cash.

Private bank loan

You will only be able to borrow up to S$337,500 for the flat (75% of S$450,000). 20% of the remaining can be paid with cash, your CPF funds, or a combination of the two, but at least 5% of the property valuation must be paid for in cash.

In this example, 5% of S$450,000 is S$22,500 + the COV of S$20,000 = a total of S$42,500 to prepare in cash.

Type of property

For HDB and Executive condominium, the maximum loan is capped at 30% of the  borrower’s gross monthly income. This is also known as mortgage servicing ratio (MSR).

To calculate a borrower’s MSR, use the following formula:

(Monthly repayment instalments for all property loans / Gross monthly Income) x 100% ≤ 30%

For private properties, such as condominium and landed properties, the maximum loan is capped at 60% of the  borrower’s gross monthly income. This is also known as total debt servicing ratio (TDSR). Monthly debt obligations count towards this threshold.

For example, if you are using 20% of your income to pay for monthly car instalments, you can only use 40% of your income to service your home mortgage.

Age of property

There are restrictions on the use of CPF for older properties. The remaining lease of the property must cover the buyer till he is age 95 to be eligible for 100% CPF usage and 90% loan.

Do a personal financial and risk analysis

If you have decided to take a mortgage loan, it is important to do a personal financial and risk analysis first. While you might be eligible for a huge housing loan today, the future is uncertain. Use the 5 basic checks as a guideline to help you through.

Get a consultant who serves you, not sells to you.