Guide to Bank Housing Loans for Private Residential Property

By Lin Zhiqin

/ The Edge Property |

June 10, 2016 12:00 PM SGT

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Total Debt Servicing Ratio (TDSR)

TDSR is the ratio of a borrower’s total monthly debt obligations to total monthly income

TDSR is capped at 60%

The sum of all monthly debt obligations such as existing home loan, new home loan, car loan and personal loan must not be more than 60% of total monthly income

Loan-to-value (LTV) ratio and minimum cash down payment

LTV is the ratio of the amount of loan to the current market value of the property

LTV and minimum cash down payment are dependent on number of existing housing loans, loan tenure and borrower’s age

The remaining balance between the amount of loan granted and the minimum cash down payment may be paid using CPF funds and/or cash

	Max LTV	Minimum cash down payment
• Borrower does not have existing housing loan• loan tenure does not exceed 30 years • sum of the loan tenure and the age of the borrower at the time of applying for the loan does not extend beyond 65 years	80%	5%
• Borrower does not have existing housing loan• loan tenure exceeds 30 years (up to a maximum of 35 years) • sum of the loan tenure and the age of the borrower at the time of applying for the loan extends beyond 65 years	60%	10%
• Borrower has an existing housing loan• tenure of new loan does not exceed 30 years • sum of the new loan tenure and the age of the borrower at the time of applying for the loan does not extend beyond 65 years	50%	25%
• Borrower has an existing housing loan• tenure of new loan exceeds 30 years (up to a maximum of 35 years) • sum of the new loan tenure and the age of the borrower at the time of applying for the loan extends beyond 65 years.	30%	25%
• Borrower has two or more existing housing loans• tenure of new loan does not exceed 30 years • sum of the new loan tenure and the age of the borrower at the time of applying for the loan does not extend beyond 65 years.	40%	25%
• Borrower has two or more existing housing loans• tenure of new loan exceeds 30 years (up to a maximum of 35 years) • sum of the new loan tenure and the age of the borrower at the time of applying for the loan extends beyond 65 years.	20%	25%

LTV is capped at 20% for non-individual borrowers

Procedure for application

Compare home loan packages and shortlist those that meet your criteria with competitive rates

Consider hiring a mortgage consultant who can help you find the best package for your needs and handle the paperwork

Interest rates can differ between banks

Terms of loan packages can also differ, such as lock-in period, fixed versus floating interest rates or rates pegged to the bank’s fixed deposit rates

Apply for Approval-in-Principle (AIP)

An Approval-in-Principle (AIP) is a conditional approval for home loans

An AIP lets you know your eligible loan quantum and monthly mortgage payable

Having an AIP before booking prevents the forfeiture of your booking fee should there be hiccups in the process of mortgage approval

Some sellers will not proceed with a sale to buyers without an AIP

The bank will need to know details such as the type of property you intend to buy and your debt obligations including housing loan, car loan, personal loan and study loan

Submit documents such as recent pay slips, income tax statements and documents of credit facilities

An AIP is non-binding. You are free to shop around for the best interest rate

Submitting too many applications (more than 2 or 3) might affect your credit rating

Receive AIP

The bank will inform you on your loan eligibility after evaluating your application

The validity of the AIP ranges from bank to bank, typically one month

You can reapply if the AIP expires

Obtain indicative valuation

The bank will need the full address and built-in area of the property to give an indicative valuation

The amount of loan granted (LTV) is based on the lower of the purchase price or bank’s valuation of the property

The borrower will have to fork out more cash for the down payment if the purchase price is higher than the valuation as the bank will only loan up to 80% of the value of the property

Pay booking fee to seller or developer

Obtain Option to Purchase (OTP) and submit OTP to bank

Receive Letter of Offer (LO)

The LO is a contract stating the terms of the loan offered by the bank to the borrower

Sign Letter of Offer (LO)

This forms a binding contract between the bank and the borrower

Exercise OTP

Bank makes loan disbursement to seller upon completion of the Sale and Purchase of the property

Completion of Sale and Purchase typically takes about 12 weeks from the date of exercise of OTP

- The bank will send a Loan Disbursement Advice and notice to start monthly repayment

- Start monthly repayment for your home loan

Source: www.moneysense.gov.sg, MAS, The Edge Property

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