What is LTV?
The Loan-to-value (LTV) ratio is the housing loan quantum that borrowers may apply for expressed as a ratio to the value of the property they are using as collateral for the loan.
What are the changes?
On 5 July 2018, the Government announced adjustments to the LTV limits for all housing loans granted by banks and financial institutions. The revised LTV limits apply to housing loans taken to finance the purchase of residential properties where the Option to Purchase was granted on or after 6 July 2018. Housing loans taken directly from HDB for the purchase of a HDB flat will not be affected by the revised LTV limits.
The revised LTV limits reduce the maximum housing loan quantum that borrowers can now take from banks and financial institutions in relation to the number of outstanding housing loans that they already have. There are no changes made to the existing rules on minimum cash component that property buyers have to pay for the purchase of both HDB flats and private properties. This means that the difference between the minimum cash downpayment and the applicable maximum housing loan quantum for a property purchase can be paid for using CPF monies, cash, or a combination of both.
The revised LTV limits applicable to all housing loans granted by banks and financial institutions are set out below
*Note that borrowers who currently own residential properties with the intention to sell them, will be treated as not having any outstanding housing loan in the current housing loan application if: (a) where the property to be purchased is a HDB flat, the borrowers provide the bank with a copy of their signed undertaking to HDB to sell their existing property in the period stipulated in the undertaking; or (b) where the property to be purchased is a private property, the borrowers provide the bank with evidence that their existing properties have been sold prior to the disbursement of their housing loan. This includes a signed Sale and Purchase Agreement for the sale of an existing private property with a certificate from IRAS showing that stamp duty has been paid on the agreement, or a letter of approval from HDB approving the sale of an existing HDB flat.
**In the case of joint borrowers, MAS regulations stipulate that banks and financial institutions shall use the income-weighted average age of all the borrowers, in determining whether the sum of the loan tenure and the borrower’s age extends past 65 years.
With the revised LTV limits, prospective home buyers should exercise prudence and ensure that they have sufficient cash and CPF monies for the downpayment before committing to a purchase, so that they do not overstretch themselves financially.
Borrowers should take note that the amount of housing loan they can take from banks and financial institutions is also subject to the Total Debt Servicing Ratio (TDSR) framework, which takes into account their total monthly debt obligations as well as their total monthly income.
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