Purchasing a house and signing up for a housing loan loan is a huge milestone. With so many different home loans, it may sometimes feel overwhelming to find the right and best home loan for you.
Here are a few commonly asked questions and answers on home loan, to help you understand home loan better:
1. Can I get loan rates lower than what is “published”?
Yes, you can. Different banks offer different rates, and these rates differ at different times. However, this also depends on your loan quantum and credit score. If you have a higher loan quantum and credit score, you might be able to enjoy better rates or terms, as compared to what is “published”.
Need help finding the best housing loan rates in Singapore? Contact our professional advisors and reach our entire panel banks for the best rates, only at InsureDIY.
2. How much housing loan can I borrow in Singapore?
Banks and financial institutions have multiple criteria to determine how much home loan you can borrow. Generally, these are the factors affecting your home loan amount:
- Gross Monthly Income
- Your Age
- Loan Quantum
- Credit Score (e.g., Total Debt Servicing Ratio / Mortgage Service Ratio)
- Type of Property
- Loan-to-value Limit
- Others
Loan-to-value Limit (LTV)
LTV determines the maximum house loan amount you can borrow. You can calculate by:
LTV = Loan amount / Property value
Typically, banks and financial institutions will consider the factors below before granting the LTV:
- Existing loans and credit facilities
- Monthly repayment instalment as a proportion of gross monthly income
- Loan Tenure
- Discount, rebate or other benefits provided
Your LTV limit will change depending on the number of outstanding housing loans you have.
Total Debt Servicing Ratio (TDSR)
TDSR refers to the allocation of your (the borrower’s) gross monthly income that is used for repaying monthly debt obligations, including the loan that you’re applying for.
Mortgage Servicing Ratio (MSR)
MSR is the allocation of your gross monthly income that will be used to repay all your property loans, including the loan you’re applying for.
The TDSR is capped at 55% of your gross monthly income for private properties, while HDB is capped at 30% for both TDSR and MSR.
3. What is a mortgage offset account?
A mortgage offset account is a special deposit account that is linked to your home loan, and is offered by the same bank. You can place your cash in this account to earn the same interest as your mortgage rate for up to 70% of the funds deposited.
It’s a great option if you’re a saver. While this account won’t earn you any interest throughout your home loan repayment period, you’ll be able to offset some interest as savings accounts typically yield lesser interest than loans.
For example, if your home loan is $250,000 and you have $50,000 in your offset account, you’ll only be charged interest on the loan balance of $200,000 ($250,000 – $50,000). At the same time, your $50,000 is not locked in and is still accessible, on top of lowering your overall home loan interest payments.
4. Should I get a loan if my property is under construction?
Yes, you should. Especially if you’re planning to use CPF for your down payments. This is because you’ll have to show evidence that you’ve gotten a house loan before CPF can disburse your money.
We hope these questions helped you understand housing loans better. If you have any more questions or need help finding the best home loans, contact our friendly housing loan professionals here or compare home loans here.