How Do You Calculate Your Housing Loan?


A home is one of the most valuable assets you can buy. Whether you are buying your first or second home, knowing how much you can access makes it easy to plan your finances.

If you are buying a home for the first time, you must be wondering how to handle the complex loan calculations.

This article will serve as a guide on how to calculate housing loan so that you can have an idea of how much you can get from your lender.

It is important to note that the mortgage amount you can obtain from a lender is determined by factors such as your credit score and income, and the regulations, among others.

Let’s get to it and find out how to calculate housing loan.

Factors That Affect The Loan Amount And Loan Term

The loan amount is the money you will get from a lender, while the tenure refers to the loan duration.

The mortgage loan amount and tenure depend on several factors. Here are the main factors that affect the loan amount and tenure.

Age And Set Regulations

The younger you are, the longer the loan duration you are likely to get from a lender. As per the regulations, the maximum loan tenure for HDB flats is 30 years while that of private properties is 35 years.

For a longer loan tenure of more than 25 years for HDB flats, the loan amount that you can access may be reduced to 55% of the value of the property. This also applies if the loan tenure for private properties exceeds 30 years.

Income And The Total Debt Servicing Ratio

Before a lender can extend credit to you for purchasing a home, it will consider your total debt servicing ratio (TDSR), which is capped at 55% of your income.

The TDSR refers to the amount of your income that goes toward debt obligations. Your total debt amount, including the loan you are applying for, should not exceed 55% of your income.

If you opt to buy a HDB flat, then the mortgage service ratio (MSR) comes into play. The MSR is the portion of your income that you use to pay property loans. The MSR is capped at 30% of your income.

Loan-To-Value Ratio

The loan-to-value (LTV) ratio determines how much you can borrow from banks and HDB.

As part of the property cooling measures introduced in 2018, the maximum LTV for bank loans was set at 75%. The maximum LTV for HDB loans was set at 80% on 30 Sep 2022.

The LTV ratio depends on the number of outstanding loans you have. The more outstanding loans, the lower the LTV.

With the above factors in mind, you can use the home loan calculator to see how much you can borrow.

Remember that the lender makes the final decision on how much housing loan you can obtain. However, the housing loan calculator gives you a good idea of how much you are likely to get from lenders.

Calculating the Value of Your Property

According to the Inland Revenue Authority of Singapore (IRAS), the annual revenue of a property is the estimated income you could get if it’s rented out. IRAS determines the value of a property based on the following:

  • Location Of The Property

Properties located in prime areas will have more value. This is because such properties generate more income, which means they will have a high annual value.

  • Comparable Property Value

This is determined by the income generated by similar properties in your area. IRAS, which maintains the data, can determine the value of a property based on similar properties in the same locality.

  • Property Size

The bigger the property, the more value it will have. Bigger properties will derive more income as compared to smaller ones.

This means more revenue and a higher annual valuation. For instance, a one-room HDB flat can have a value of $5,100 while a five-roomed house may have a value of $10,380.

  • Property Condition

Deteriorated property conditions will make it lose value. The opposite is true. A well-kept home will have more value.

In Singapore, IRAS determines the value of the property based on the above factors. It reviews the value once per year to keep up with the changes in the market rental values.

You can visit its website and log into your property to check the value. You can also check the value of a property you would like to buy.

How Much Mortgage Can You Afford?

Buying a home is a long-term investment, so you need to ensure you can afford it in the long run. Review your resources and make sure you can afford all the related costs.

Here are some charges to consider.

Upfront Costs

These include the downpayment, stamp duty, legal costs, agent commission, renovations, and miscellaneous costs.

Ongoing Costs

Some costs can’t be paid with CPF savings. You will have to factor in such costs by setting aside money for the following:

  • Monthly costs such as property tax, management fees, and fire and mortgage insurance
  • Interest hikes if you opt for a variable loan
  • If the LTV ratio is exceeded in the event of a property value drop

Monthly Loan Installments

You will need to ensure you can cover the monthly loan installments adequately.

The amount you will need to pay depends on the mortgage amount you qualify for, interest rate, how interest is compounded, and the loan tenure. High mortgage amounts with short loan tenures will have higher monthly repayments.

With a longer repayment duration, you will have fewer monthly repayments, but you will pay more interest in the long run.

Review your finances after considering the above costs and see how much you can raise towards your mortgage. Your funds can come from your:

  • Income
  • CPF savings
  • Cash savings
  • Net sales proceeds from your current home

Lenders will assess how much you can borrow after considering these metrics:

Mortgage Service Ratio (MSR)

The MSR is the amount of your income that goes into servicing your mortgage. It’s calculated by dividing the monthly mortgage amount by your gross monthly income.

The monthly installment you pay towards your HDB flat or mortgage for your executive condominium should not be more than 30% of your income.

Total Debt Servicing Ratio (TDSR)

The TDSR refers to the amount of your income that goes into servicing debts. Your TDSR should not exceed 55% of your income.

LTV Ratio

The LTV ratio determines the amount you can borrow to buy a property. HDB offers an LTV of 80%, while banks offer 75% of the property value.

Before you get the LTV ratio from a lender, it will consider your:

  • Existing loans
  • Loan tenure
  • Monthly installments in comparison to the gross monthly income

Your LTV ratio depends on the number of outstanding loans you have.

Here’s a summary:

Outstanding Housing LoansLTV RatioMinimum Cash Downpayment
None75% or 55%5% downpayment in cash for 75% LTV
10% downpayment in cash for 55% LTV
145% or 25%25%
2 or more35% or 15%25%

If the loan tenure is more than 30 years, the lower LTV ratio applies.

Taking the set metrics and ongoing costs into consideration will help you to determine the mortgage amount you can afford.

A mortgage calculator will help you determine the amount you can get from the lender. Make sure you can comfortably afford the monthly installment.

How to Calculate Your Mortgage Payment

When calculating the mortgage repayment amount, you will need to consider the following:

  • The type of property you want (i.e. HDB flat or private property)
  • Whether the property is under construction or a resale flat
  • Age of the buyer
  • Citizenship status
  • Other monthly obligations such as credit card payments and other loans
  • Whether you are buying the property jointly with your spouse

What Is The Maximum Housing Loan You Can Get?

The housing loan amount you can get is determined by several factors. Here are the main factors that will determine the loan amount you can get.

LTV Ratio

If you opt to take a bank loan, you can get a maximum of 75% of the property value. HDB can offer 80% of the property value.

Borrower’s Earnings And Obligations

Out of the 75% or 80% LTV ratio, you must also take the MSR and TDSR into consideration. The TDSR should not exceed 55% of your income.

This means that even if you qualify for a higher LTV ratio but your TDSR is high, you can only qualify for a lower housing loan amount.

Lease Period On The Property

Properties with less than 35 years remaining on their lease don’t qualify for housing loans. The remaining lease period on a property determines the LTV ratio.

Properties with a lease period of 35 to 60 years have an LTV of 60%.

Loan Tenure

If the loan tenure is more than 30 years, the LTV is limited to 55%. Those who are older will get lower housing loans as they are nearing retirement.

Credit Rating

A poor credit rating will affect the LTV ratio. If you have a poor credit rating, your LTV may go as low as 40%.

Get The Best Home Loan Deal

Knowing how to calculate housing loan is a critical first step in understanding how much you can afford to borrow for your new home.

By using a mortgage calculator, you will easily estimate your monthly payments and get a better idea of what you can afford.

With a little bit of planning, you can confidently apply for a housing loan that fits both your budget and lifestyle.

Get the best downpayment deals from licensed money lender Katong Credit. We offer personal loans that are affordable and approved quickly.

Contact us now or apply for a loan today to get the downpayment you need to buy your dream home.

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