If you’re planning to buy a home in Singapore, one of the most common terms you’ll come across, especially when it comes to financing it, is the Loan-to-Value (LTV) ratio. Understanding your LTV and its considerations is key to knowing how much you can borrow for your property purchase. This full guide will break down in simple terms what LTV is, how much you can borrow, how much cash you will need upfront for downpayment, and the differences in the loan types available.
What is Loan-To-Value (LTV)?
The Loan-to-Value (LTV) ratio refers to the maximum percentage of a property’s purchase price or market value, whichever is lower, that a home buyer can borrow through a loan.
To illustrate, if your property costs $1 million and the LTV is 75%, you can borrow up to $750,000. You will then need to cover the rest either with cash or CPF savings.
The LTV limit is a guideline that all financial institutions follow, and it is non-negotiable with the bank or HDB. It is set in place to ensure lenders don’t take unnecessary risks.
In Singapore, LTV limits are regulated by the Monetary Authority of Singapore (MAS). The LTV ratios may also be adjusted over the years as part of property cooling measures to prevent excessive borrowing or speculative buying.
Understanding your LTV is important because it tells you how much of the property price you’ll need to pay on your own. It also affects your loan approval, monthly repayments, and financial flexibility.
Key Factors that Affect your LTV Limit
Several factors can influence your LTV limit:
Number of Existing Housing Loans
If you’re a buyer purchasing your first home, you’ll typically be able to get the maximum LTV of up to 75% from banks or HDB. If you already have one or more outstanding housing loans, the LTV limit you qualify for will be significantly lower. This is because lenders view multiple loans as a higher credit risk.
Type of Property
HDB flats are more regulated and come with their own set of loan eligibility criteria. Private properties generally have stricter financing rules. Banks may also assess private properties differently depending on their location, condition, and demand in the market due to their perceived value and resale potential.
Loan Type
You can borrow up to 75% LTV under the HDB loan scheme if you’re eligible. For bank loans, they cap out at 75% LTV as well, but often lower if other factors apply. Each loan type has its conditions around interest rates, downpayments, and repayment flexibility.
Loan Tenure and Borrower’s Age
Loan tenures can go up to 25 years for HDB loans, 30 years for HDB flats financed through banks, and 35 years for private properties. However, your LTV limit may be reduced by the bank with a longer loan tenure or if the combined total of your age and loan tenure goes beyond 65.
Total Debt Servicing Ratio (TDSR)
The Total Debt Servicing Ratio (TDSR) directly impacts the Loan-to-Value (LTV) ratio you can secure. While LTV determines the maximum percentage of a property’s value you can borrow (e.g., 75%), TDSR limits your monthly debt to 55% of your income. If your TDSR exceeds 55% with a high LTV, banks will lower your LTV. It is important to note that the lower your LTV is, the higher your upfront cost.
Credit Profile
Your credit score can also highly influence the LTV you can qualify for. If you have a history of overdue payments, high debt obligations, or unstable income, you may be flagged as a credit risk, and banks may offer you a smaller loan amount.
Current LTV Limits
HDB Loans
As of 20 August 2024, the HDB LTV limit has been revised from 80% to 75%. The rest has to be paid through your CPF savings or in cash.
The revised HDB LTV limit applies to:
- Resale applications submitted on or after 20 August 2024
- BTO applications for the October 2024 launch onwards
Bank Loans
The current LTV limits for bank loans, depending on the number of existing home loans (on or after 6 July 2018) are as follows:
| Existing Housing Loans | LTV Limit | Min. Downpayment in Cash | ||
| None | 75% | 55%* | 5% | 10%* |
| 1 | 45% | 25%* | 25% | |
| 2 or more | 35% | 15%* | 25% | |
*Use this limit if the loan tenure exceeds 30 years (or 25 years for HDB flats), or the loan tenure exceeds the borrower’s age of 65 years.
Source: MAS
How Much You Can Borrow and Your Downpayment
Assuming you have met the TDSR requirements, here’s a short example of how it works in two different situations:
Let’s say you are buying a condominium (private property) for $1,000,000 with a 75% LTV and you have no existing loans, you can borrow up to $750,000. You will need to pay $250,000 upfront, where at least 5% ($50,000) must be in cash, and the remaining 20% ($200,000) can be paid with cash or CPF.
If your LTV is reduced to 45% due to it being your second housing loan, you can only borrow $450,000, and you have to pay $550,000 upfront, with at least 25% ($250,000) in cash.
Differences between HDB and Bank Loan
Here’s an overview of the main differences you should consider when deciding between taking up an HDB or a bank loan (as of 20 August 2024):
| HDB Loan | Bank Loan | |
| Max LTV | 75% (previously 80%) | 75% |
| Downpayment | 25% can be paid fully with CPF | 25% of which 5% must be paid in cash |
| Interest Rates | 2.6% p.a. | Varies (floating or fixed) |
| Citizenship Eligibility | Singaporean Citizen, Permanent Resident (PR) | Singapore Citizen, Permanent Resident (PR), Foreigners (with a valid work pass) |
| Loan Tenure | Up to 25 years | Up to 30 years (for HDB) Up to 35 years (for Private Property) |
| Early Repayment | No Penalty (No Lock-in Period) | May have fees during lock-in |
Source: HDB
HDB loans are more accessible and less strict, especially for first-time buyers. But if you want lower interest rates or more flexible options, bank loans might be a better choice. However, it is important to note that they come with a stricter LTV limit and assessment and a higher upfront cost.
In Summary
It can be tempting to borrow as much as you can, but it is also important to consider your affordability and ability to pay off the loan in the long term.
Taking on a large home loan might stretch your finances and reduce your ability to handle unexpected costs like renovations, interest rate hikes, or other emergencies. LTV limits are set in place to prevent overcommitment and to help homebuyers control their finances.
If you are still unsure of how much you can borrow or your eligibility, you are encouraged to reach out to Redbrick Mortgage Advisory to clarify your doubts. Our experienced advisors can help you make sense of your home financing options and work out a loan strategy that fits your financial goals.
