If you want to relocate to Singapore permanently to work or start a business, then buying a property in the country might be something that you want to do. Perhaps you are fairly close to owning your own property and have negotiated prices, paid the Option to Purchase deposit, and are about to apply for a mortgage loan to purchase the house of your dreams.
However, it’s important to bear in mind that purchasing properties has always been quite a complicated process. Not only do you need to find the right property, put there are several legal documents to file before you even get round to financing the purchase. Getting a bank loan is one of the most important aspects of buying a house in Singapore, given that it’s going to impact your finances for the next two decades or so.
Before you apply for a mortgage, understanding the different criteria that banks look at will help you make sure that your mortgage application is successful.
It’s important for buyers to be aware of the market that they are looking at, since different loan packages are offered by the banks based on whether you are buying into private or public housing. You can learn more about the different types of loans such as a DBS housing loan and find suitable properties for sale at PropertyGuru. PropertyGuru is the top property site for Singapore and is a great resource for anybody looking to buy a house or flat, whether you are in the process of relocating to Singapore or have lived there for some time already.
Number of properties owned
If you are buying your first property in Singapore, then you will get a higher Loan to Value ratio (LTV) allowing you to borrow more money to finance your purchase. There are several factors that can impact the LTV including the age of the borrower, the number of properties that they own and the type of property to be purchased. On the other hand, if you already own one or more properties in Singapore, then you will be offered a lower LTV, meaning that you will need to finance the remainder. Ultimately, the more properties you have, the less willing banks might be to lend you more money, due to your increasing financial commitments.
Borrower age and mortgage loan length
Another main thing to consider when applying for a home loan in Singapore is the age of the borrower when the mortgage matures. If you are going to be sixty-five years of age or older when the loan tenure comes to an end, then you are likely to be offered lower LTV by the banks due to the higher risks of defaulting or retiring before the mortgage loan has been paid. If you are going to be this age or older when your mortgage tenure comes to an end, then you will need to be prepared to put down a higher down payment for the property.
Number of borrowers
The number of people who will be named on the mortgage is another factor banks will consider. If there is a single borrower, only their income, age, and other factors will be considered in the application. On the other hand, if there are two or more borrowers, the bank may use Income Weighted Average Age which multiplies the age of individual borrowers by their income before finding the average.
Along with your income and age, the banks will also consider your financial situation and carry out an assessment of your monthly commitments. They will look at any existing loans and credit cards to ensure that you are not paying a lot of debt off or behind on payments, and that you are in good financial health.
If you have been managing your money wisely and have paid all loan and credit card payments on time, then you are likely to be offered a higher LTV by the banks. Banks will use Mortgage Servicing Ratio and Total Debt Servicing Ratio as an estimate to evaluate your monthly commitments. If you’re purchasing certain types of property such as a Housing Development Board (HDB) flat, then your monthly instalments should not be more than an MSR of thirty percent. On the other hand, those purchasing a private property should have an MSR of no larger than fifty-five percent.
Purchase motivation and purpose
Finally, banks will also look at your reasons and motivation for purchasing the property. Better loan packages tend to be offered to buyers who are purchasing the property for their own use in Singapore compared to those who are buying a property to rent it out or sell it on for capital investments.
Buying a property is a popular option with those looking to start a life in Singapore. But before you apply for a home loan, it’s always good to know what criteria the banks will be looking for to improve your chance of having the application accepted.