WHAT IS LTV AND SHOULD YOU REALLY MAXIMISE THE LTV USAGE FOR YOUR HOME LOAN?

Getting as much help as possible with your home loan via borrowing may sound like a brilliant idea with how much properties cost in Singapore - but does it really work out to your advantage at the end of the day? Read on to find out how you can best make use of the Loan-to-Value (LTV) limit to avoid getting the short end of the stick.

- WENDY KER

As explained by the Monetary Authority of Singapore, the LTV refers to 'The maximum amount that an individual can borrow for a housing loan from a financial institution (FI) based on the loan tenure, borrower's age, borrower's existing loans and whether the borrower is a shell company.'

This limit (refer to table above) was first realised in a bid to curb over-borrowing from homebuyers alongside the Total Debt Servicing Ratio (TDSR), and the current LTV limit where the Option To Purchase (OTP) is granted on or after 6 July 2018.

NEW LTV LIMITS FOR HDB HOUSING LOANS

However, with the sudden announcement of the most recent cooling measures last November came a lowered LTV limit for HDB Housing Loans from 85% to 80%. With a lower LTV, home buyers have to commit to a larger down payment during the purchase of a property. The lower LTV limit will apply to new flat applications for sales exercises launched, and complete resale applications received by HDB on or after Sep 30, 2022.

HOW WOULD LOWER LTV AFFECT YOU?

Take for example a young couple with no kids, looking to buy their first home. While there are still substantial housing grants up to $80,000 when buying a subsidised flat straight from HDB, and up to $160,000 when buying a resale flat, the new LTV limit might still prove to be a tough challenge.

They might then have to ask themselves: Should they still consider moving forward with a HDB? Or would a condo, which offers a better investment, be the prudent way out?

Similarly, financially challenged families will most definitely feel the burn with this newest measure. The fact of the matter is while housing grants may seem to offer an attractive amount to offset, at the end of the day it is not always easy and/or possible to be granted the highest quota.

LTV LIMIT FOR BANK LOANS