Most people would likely take a loan to finance their property, whether it’s an HDB loan or a bank loan. But that doesn’t mean you can borrow as much as you want, as there’s a limit to how much financing we can obtain. This is called the Loan-to-Value (LTV) limit, which restricts how much property buyers can borrow from HDB and banks to finance their properties.
Under the new property cooling measures announced in August 2024, the LTV limit for HDB loans was adjusted down from 80% to 75%, meaning it’s now on par with the LTV limit for bank loans.
In this guide, we’ll help you understand the LTV ratio and the factors that could affect your LTV limit.
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LTV Ratio: An Overview
| What is LTV? | The LTV ratio is the amount that you are allowed to borrow to finance your home |
| HDB loan LTV limit | Up to 75% of the purchase price/property value |
| Bank loan LTV limit | Up to 75% of the purchase price/property value |
| Factors that may affect your LTV limit | The property’s lease, location and condition, your age, credit score, and existing loans |
What Is LTV?
Let’s first go back to basics. The LTV determines the maximum amount of funds you can borrow and hence, how much downpayment you need to pay upfront in cash and/or CPF Ordinary Account (OA) savings. It applies as long as you take out a home loan to finance your property purchase, whether it’s your first, second, or nth mortgage.
An LTV ratio of 75% means you can borrow up to 75% of your property value (or purchase price, whichever is lower). LTV ratios are implemented as a safeguard against borrowers’ over-leveraging.
Note that for new launches (e.g., new HDB flats (Build-to-Order (BTO flats), new executive condos (ECs), and new launch condominiums), the LTV ratio will always be based on the purchase price.
If you buy a resale property and you pay more than the amount of its HDB or bank valuation, that cash over value (COV) amount must be paid in cash. For example, if you pay $530,000 for a property valued at $500,000, the LTV will apply to the $500,000 valuation, and you must pay the $30,000 in cash.
LTV in Singapore
HDB Housing LTV (up to 75%)
With effect from 20 August 2024, the HDB Concessionary Loan (the HDB housing loan, which is only available for BTO, Sale of Balance Flats (SBF), open booking of flats, and resale flat purchases) has a maximum LTV ratio of 75%. You can loan up to 75% of the purchase price/property value.
The downpayment can be paid by cash, from available savings in your CPF OA, or a mix of both. There is no minimum cash component. Since you can only own one HDB flat (and hence an HDB housing loan) at any given time, this is the only LTV you need to know.
Bank LTV (up to 75%)
For a bank loan, the maximum LTV ratio is capped at 75% LTV for the first loan (i.e. if you have no outstanding home loans). Of the remaining 25%, 5% must be paid in cash. The remaining 20% can be paid using a combination of cash or your CPF-OA savings.
Why You May Not Always Qualify for the Maximum LTV
It’s important to note that HDB and banks are not obligated to loan you the full LTV. They can approve a lower LTV limit or reject your application outright. If that’s happened to you, here are some possible reasons:
1. You have an existing home loan
Your LTV limit changes depending on the number of outstanding housing loans you have. If you have no existing home loans, you will qualify for 55% or 75% LTV. If it’s your second home loan, you’ll qualify for 25% or 45% LTV, and if it’s your third home loan, you will qualify for 15% or 35% LTV.
2. Your Age and Loan Tenure Exceed 65 years
If the sum of your age and loan tenure exceeds 65 years, your LTV ratio will be capped. If the loan tenure exceeds 30 years, your LTV limit will also be lower. The maximum loan tenure for housing loans is capped at 30 years for HDB flats and 35 years for non-HDB properties.
3. You Have a Bad Credit Score or Rating
If you have a history of late payments and defaults on loans, you might be flagged as a credit risk. Banks may offer you a lower LTV than the allowable limit, such as 60% instead of 75% for a first bank loan.
4. The Remaining Lease of the Property May Be Too Low
Leasehold properties with 30 to 40 years left on their lease may incur an LTV ratio of 60%. The reason is that banks feel that properties with dwindling leases constitute less satisfactory collateral because of lowering market value towards the end of a lease.
You may also find that you cannot use your CPF funds to pay for such properties.
5. The Property Location and Condition Are Poor
The LTV cap can be lowered significantly based on the location and state of your property. Properties based abroad tend to get lower LTV limits. Properties in a less favourable neighbourhood, those with significant defects or are dilapidated, or those with lawsuits filed against them may also result in a lower LTV ratio.
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