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Understand what is Loan-To-Value Ratio (LTV)

For first-time home buyers, whether you’re considering an HDB loan or a bank loan, it’s important to understand the concept of the Loan-to-Value (LTV) ratio. This ratio determines the maximum amount of funds you can borrow to finance your property purchase and influences the amount of downpayment you need to pay upfront in cash and/or CPF Ordinary Account (OA) savings. The LTV ratio is a restriction put in place by the Singapore government to prevent over-borrowing and ensure responsible lending practices.

The LTV ratio applies to all home loans, whether it’s your first, second, or nth mortgage. In September 2022, new cooling measures were introduced, resulting in revised LTV limits. Currently, the LTV limit for bank loans remains unchanged at up to 75%, while the LTV limit for HDB loans was adjusted down from 85% to 80%.

Let’s take a closer look at the LTV ratio and the differences between HDB and bank loans:


LTV Ratio: An Overview

The LTV ratio represents the maximum amount you can borrow to finance your home. It is expressed as a percentage of the property value or purchase price, whichever is lower. For example, an LTV ratio of 80% means you can borrow up to 80% of the property value or purchase price.

Factors Affecting Your LTV

Several factors can influence your LTV ratio, including the lease, location, and condition of the property, as well as your age and credit score. Leasehold properties with a low remaining lease of 30 to 40 years may result in a lower LTV ratio. Properties located in less desirable neighborhoods or with significant defects may also merit a lower LTV ratio. Additionally, if your loan tenure extends past 65 years of age or exceeds 30 years, the LTV ratio may be capped. A history of late payments and defaults on loans can also impact your credit score and result in a lower LTV.


HDB Housing LTV (up to 80%)

For HDB housing loans, the maximum LTV ratio is 80%. This applies to HDB Concessionary Loans, which are available for BTO, Sale of Balance Flats (SBF), open booking of flats, and resale flat purchases. The downpayment can be paid in cash, CPF OA savings, or a combination of both. There is no minimum cash component required.


Bank LTV (up to 75%)

Bank loans have a maximum LTV ratio capped at 75% for the first loan, assuming you have no outstanding home loans. Of the remaining 25%, 5% must be paid in cash, while the remaining 20% can be paid using a combination of cash or CPF OA savings. The bank loan LTV used to be 80%, but it was tightened to 75% in 2018 as part of property cooling measures.

It’s important to note that HDB and banks are not obligated to loan you the full LTV. They have the discretion to approve a lower LTV limit or reject your application outright based on various factors.

Understanding the LTV ratio is crucial when planning to finance your property purchase. It helps you determine how much you can borrow and how much downpayment you need to prepare. By being aware of the factors that can affect your LTV, you can better assess your eligibility and make informed decisions throughout the home buying process.

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