Buying a home is one of the biggest financial decisions you’ll ever make. Although a big part of it is choosing a property you love, figuring out how to pay for it in a sustainable, smart way is far more significant. For most Singaporeans, this means securing a home loan.
But before you start dreaming about renovations or picking out new furniture, lies the all-important question: how much can I borrow for a home loan? The answer depends on several factors—some more obvious than others. In this guide, we’ll walk you through the key criteria that banks and housing authorities consider, the formulas behind your loan eligibility, and even how to boost your borrowing limit if needed. We’ll also touch on alternative financing options, such as seeking support from a licensed money lender in Paya Lebar like SG Licensed Money Lender, especially if you need more flexible terms or faster approval.
The Big Picture: What Determines How Much You Can Borrow?
Your home loan amount isn’t just plucked from thin air. Whether you’re taking out a bank loan or an HDB Concessionary Loan, lenders will assess multiple variables to determine your eligibility. These include:
1. Type of Housing Loan
Different loan schemes come with different borrowing limits. For example:
- HDB Concessionary Loans allow you to borrow up to 80% of your property’s purchase price.
- Bank home loans, on the other hand, typically max out at 75%.
This difference can have a significant impact on your upfront payment and long-term repayment plan.
2. Your Income
It’s simple: the higher your monthly income, the higher the amount you’re likely to qualify for. That said, lenders evaluate gross monthly income, and self-employed individuals or those on commission may be assessed using more conservative figures to account for income fluctuations.
3. Age and Loan Tenure
Your age at the time of the loan application directly influences your loan tenure. The younger you are, the longer you can stretch out your repayment period. However, once your tenure surpasses 30 years (for private property) or 25 years (for HDB flats), or if it extends past your 65th birthday, you might be offered a lower maximum loan quantum.
4. Credit Score
Your credit history speaks volumes about your financial habits, so make sure to check your credit score regularly. A healthy score increases your chances of not just loan approval, but also better interest rates and higher limits. A poor credit score, however, may result in a reduced Loan-to-Value (LTV) ratio, or worse, a rejected application.
5. Existing Debt Obligations
If you’re already servicing loans for a car, education, or personal expenses, your debt servicing capacity shrinks. This means you’ll have less room to take on a new loan, and lenders will be quick to factor that into their calculations.
TDSR and MSR: The Two Key Ratios That Define Your Limits
To prevent borrowers from biting off more than they can chew, the Monetary Authority of Singapore (MAS) introduced two financial frameworks: the Total Debt Servicing Ratio (TDSR) and the Mortgage Servicing Ratio (MSR).
Total Debt Servicing Ratio (TDSR)
TDSR is a broad-based framework that applies to all property loans, HDB or private. It sets a firm cap on how much of your gross monthly income can be used to service all your debt obligations, including your new mortgage. Currently, the TDSR limit is set at 55% of your gross monthly income.
Formula:
(Total Monthly Debt Repayments / Gross Monthly Income) x 100 = TDSR%
This limit ensures borrowers don’t overextend themselves financially, and it contributes to the overall stability of Singapore’s lending ecosystem.
Mortgage Servicing Ratio (MSR)
MSR is a little more specific. It applies only to HDB flats and Executive Condominiums (ECs) purchased directly from the developer. Under this scheme, your monthly housing loan repayment cannot exceed 30% of your gross monthly income.
Let’s say you earn $3,500 a month. That means your mortgage repayment must be $1,050 or less each month to fall within MSR limits.
Understanding the Loan-To-Value (LTV) Ratio
The Loan-To-Value (LTV) ratio is essentially the percentage of your property’s value that a lender is willing to finance. If the LTV ratio is 75%, you’ll need to cover the remaining 25% with a mix of cash and CPF savings.
Here’s how it breaks down:
| Loan Provider | Max LTV Ratio | Minimum Cash Downpayment |
| HDB Concessionary Loan | 80% | No minimum cash |
| Bank Home Loan | 75% | 5% (of purchase price) |
But just because those are the maximums doesn’t mean you’ll always qualify for them.
What Can Lower Your LTV Ratio?
Several factors can lead banks or HDB to reduce the LTV ratio they offer you:
- Low or unstable income: Fails TDSR or MSR limits
- High existing debts: Reduces borrowing capacity
- Existing home loans: One outstanding loan drops max LTV to 45%; two loans drop it further to 35%
- Short lease properties: Properties with less than 35 years remaining may be ineligible; 36–40 years could mean a maximum LTV of just 60%
- Poor property condition or location: Run-down homes or those in less desirable areas may result in a reduced LTV
Why Would You Want a Lower LTV?
Choosing to take on a smaller loan than you’re eligible for can have some real financial upsides, most notably:
- Lower monthly repayments
- Less interest paid over time
- Shorter loan tenure
Here are some strategies if you’d like to intentionally reduce your LTV:
- Increase your down payment: Save more or use a bridging loan if selling an existing home.
- Consider a lower-priced property: Stay within budget to avoid unnecessary debt.
- Use your CPF OA wisely: Tap into savings for upfront costs while keeping enough for future instalments.
The Power of Mortgage Calculators
Before applying for a loan, you might want to test the waters first, and that’s where a mortgage calculator comes in. These tools let you estimate your monthly instalments and understand your financial obligations before committing.
How to Use One Effectively
1. Input Loan Details
Some of the key details the calculator needs to work with are:
- Loan amount: After subtracting your down payment
- Loan tenure: Typically up to 25 or 30 years
- Interest rate: Fixed or floating; enter the actual rate quoted to you
2. Account for Extra Costs
Some calculators let you include costs like Buyer’s Stamp Duty and legal fees, giving you a fuller picture of what to expect.
3. Simulate Different Scenarios
Adjust loan tenure, initial payment, or interest rate to see how each factor changes your monthly repayments.
4. Review and Compare
Results will show your estimated monthly instalment, total interest paid, and repayment breakdown over time.
Ways to Increase Your Home Loan Eligibility
If your current financial profile limits your borrowing capacity, all is not lost. There are several steps you can take to improve your loan eligibility:
1. Boost Your Down Payment
Putting more money down up front lowers your LTV ratio, which can make lenders more comfortable offering you a higher loan. You can either tap into savings or receive help from family members.
2. Reduce Your Existing Debts
A leaner debt portfolio improves your TDSR. Pay off car loans, credit card balances, or any personal loans to make more room for a home loan in your debt budget.
3. Improve Your Credit Score
Make timely payments, avoid maxing out your credit limit, and minimise loan applications. Over time, a healthier credit report makes you a more attractive borrower.
Exploring Alternative Loan Providers
While most people head straight to banks or HDB for their mortgage needs, alternative options exist—especially if your credit profile is less than ideal. For example, SG Licensed Money Lender, a licensed money lender in Paya Lebar, may offer shorter-term property financing or bridging loans to help you cover some of the upfront costs involved until you secure a full mortgage.
Just be sure to engage only with licensed money lenders listed under the Ministry of Law to avoid unlicensed or predatory practices. Always review the interest rate, repayment schedule, and any associated fees before signing on the dotted line.
Conclusion
When getting a home loan, one shouldn’t focus solely on how much the bank will give you. Rather, one should see to it that the loan aligns with one’s income, goals, and financial future. Understanding key metrics like TDSR, MSR, and LTV will help you navigate the mortgage landscape with confidence, and knowing what affects your borrowing capacity empowers you to make informed, long-term decisions.
So, before you dive into property listings or fall in love with a dream home, take the time to understand your financial boundaries. It’ll save you stress, money, and potential headaches down the road.x5
