To protect homebuyers from over-borrowing, the Singapore government has set a loan-to-value (LTV) limit for housing loans.

In a nutshell, the LTV limit defines the maximum home loan amount HDB or a financial institution can grant you as a percentage of the property’s price or market value (whichever is lower).

The LTV for bank loans is now 75 per cent, after the government announced a tightening of LTV limits on residential property loans by 5 per cent across the board, together with other cooling measures in July 2018.

Most recently, the government announced another round of cooling measures with effect from Dec 16, 2021. This included lowering the LTV for HDB housing loans from 90 per cent to 85 per cent.

Having a lower LTV means that buyers will have to commit to a bigger downpayment, in cash and/or CPF, when buying a property.

Regardless of whether you’re purchasing your first, second or third property, we’ll walk you through all you need to know about the LTV limits, and how much extra cash/CPF funds you need as downpayment for your new home.

LTV limit for HDB housing loans

As mentioned earlier, the LTV limit for HDB housing loans has been lowered from 90 per cent to 85 per cent. This means buyers will now have to fork out 15 per cent downpayment instead of the previous 10 per cent.

Still, it’s higher than the LTV limit for taking a bank loan.

Example A: Financing a 4-room HDB flat valued at $500,000 using an HDB loan

With an 85 per cent LTV limit, your maximum loan amount will be $425,000.

This means that you’ll have to pay $75,000 downpayment with cash and/or CPF funds.

LTV limit for bank loans

For the first property loan

If you’re taking a bank loan and don’t have any outstanding housing loan, either one of these LTV limits is applicable to you:

• 75 per cent LTV limit for a loan tenure of 30 years or less, with a minimum cash downpayment of 5 per cent
• 55 per cent LTV limit for a loan tenure of more than 30 years, or if the loan extends past the age of 65. The minimum cash downpayment will be 10 per cent.

The remaining downpayment can be paid with cash and/or CPF funds.

Example B: Financing a 4-room HDB flat valued at $500,000 with a loan tenure of 25 years

The maximum loan obtainable with a 75 per cent LTV is $375,000.

This means you have to fork out a downpayment of $125,000 with cash and CPF funds. Out of this downpayment, $25,000 (5 per cent of purchase price or valuation) has to be paid in cash.

Example C: Financing a 3-bedroom condo valued at $1.5 million with a loan tenure of 30 years

For a $1.5 million condo and an LTV limit of 75 per cent, the maximum loan amount obtainable is $1,125,000.

So the downpayment will be $375,000 in cash and CPF funds. Out of this amount, you’ll have to pay $75,000 in cash.

For the second property loan

If you’re already servicing one housing loan, the LTV applicable will be lower. On top of that, the minimum cash downpayment will be higher at 25 per cent.

• 45 per cent LTV for a loan tenure of 30 years or less
• 25 per cent LTV for a loan tenure of more than 30 years, or if the loan extends past the age of 65

Example D: Financing a 3-bedroom condo valued at $1.5 million with a loan tenure of 30 years

With an LTV of 50 per cent, the maximum loan amount you can get is $675,000.

So you would have to pay $825,000 with CPF and cash, including a minimum of 375,000 in cash.

For the third property loan

To prevent people from overleveraging, the LTV will be even lower if you’re already servicing two housing loans.

Like those taking a second property loan, the minimum cash downpayment will be 25 per cent.

• 35 per cent LTV for a loan tenure of 30 years or less
• 15 per cent LTV for a loan tenure of more than 30 years, or if the loan extends past the age of 65

Example E: Financing a 3-bedroom condo valued at $1.5 million with a loan tenure of 30 years

With an LTV of 35 per cent, the maximum loan you can get is $525,000.

This means that the downpayment will be $975,000, with a minimum of $375,000 to be paid in cash.

What if I have an outstanding housing loan but intend to sell my HDB flat to upgrade?

In this case, you can be treated as someone with no outstanding housing loans. According to UOB, the outstanding home loan on your flat will not affect the maximum loan amount you can get for the new property.

But you’ll need to provide documents such as a copy of the approval letter from HDB and a copy of a letter of undertaking to complete the sale of your HDB flat.

This article was first published in 99.co.