Everyone dreams of purchasing a home in cash. Sadly, only a few people have enough money to do so—and if you’re unfortunate to not be one of them, you’ll need a mortgage to finance a property.
But, the question is, how much can you actually loan to finance your home? As a mortgage consultant in Singapore, we created this infographic that provides an overview of how home loans in Singapore work.
The Factors that Lenders Use to Assess How Much You Can Afford
Income. Your sources of income extend beyond your basic wage as it may also include your pension, investments, and any cash you receive from childcare or freelancing.
Outgoings. Your outgoings may include everything you’re paying on a regular basis such as rent, utility bills, food expenses, credit cards, maintenance, and insurance.
Credit Score. Credit score matters regardless if you’re making a loan or applying for a credit card. A score of or more than 700 is generally acceptable.
How is a Credit Score Calculated? There are factors that weigh on your credit score. These include your debts and its types, your payment history, credit limits, and the age of your accounts.
Loan-to-Income Ratio. This ratio is typically capped at 4.5 times your income. For example, if your annual income is $50,000, you’re likely to qualify for up to $225,000.
Loan-to-Value Ratio. This ratio, on the other hand, is the percentage of the total appraised value of your property. For example. an LTV ratio of 50% means you can loan up to 50% of your property value.
Future Changes. On top of all these, your approval for loan will also be based on your ability to pay your mortgage in the event of future changes such as an increase in interest rates, job loss, or childbirth.
If you want to learn more about your home loan options, consult with a housing loan advisor in Singapore today.
