LTV stands for Loan-to-Value Ratio, it is used to express the ratio of a loan to the value of an asset. This indicate the maximum amount of loan you can get from a lender (bank or HDB)
In Singapore, if your LTV is 75%, the bank will lend you 75% of the property’s price or valuation (whichever is lower), and you’ll have to cover the remaining 25% through a combination of cash and CPF Ordinary Account (OA) savings.
Conditions That Affect LTV Ratio
Several factors can impact your LTV ratio, influencing how much you can borrow:
Loan Tenure:
If the loan tenure exceeds 30 years or extends beyond the borrower’s age of 65, the maximum LTV ratio decreases from 75% to 55%.
This rule applies to both private properties and HDB flats financed through bank loans.
Age of Borrower:
For borrowers nearing or above 65 years old, the LTV is reduced because the lender views the repayment period as higher risk. If the loan tenure stretches beyond age 65, you will only be eligible for a lower LTV, often 55%.
Existing Home Loans:
If you have an outstanding home loan and want to take another loan for a second property, the LTV ratio for the second property will be reduced:
Up to 45% LTV for the second loan.
Up to 35% LTV for the third loan or more.
The down payment requirements also increase accordingly.
Credit Risk:
If your credit score is low or if you have significant outstanding debt, the lender may decide to lower the LTV ratio, requiring you to pay a larger down payment.
Maintaining a good credit score is crucial to secure a favorable LTV ratio and lower interest rates.
The Loan-to-Value (LTV) ratio is a critical factor in mortgage financing. It affects the size of your loan, down payment, and overall financial commitment when purchasing a property. By understanding the LTV ratio and its impact on your property loan, you can better plan your finances and make informed decisions about homeownership or property investment.
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