Understanding Loan-to-Value (LTV)


LTV, LTV, LTV, this term is often thrown around in the property market and you probably “kind of” know what it is. Here’s a detailed explanation about what exactly it is and what it means for you.

By definition, Loan-to-Value (LTV) is obtained by taking the amount you can loan divided by the valuation of the property and represented as a percentage. The importance of LTV lies in determining how much you can borrow from the banks. This limit is set by the Singapore government and several questions are asked in order to determine the amount you can borrow for your bank housing loan:

  • Is this your first home loan? Second? Third or subsequent?
  • How long is your loan tenure?
  • What is your age?

The above table provides a comprehensive overview of the LTV for the various scenarios.

Let’s take a look at one scenario:

  • Age: 35 years old;
  • First home loan;
  • Condominium unit valued at $1,200,000; and
  • Loan tenure of 30 years.

By following the flow chart, we can see that the LTV will be 75%. This means that you can borrow $900,000 from the bank, have to come up with $60,000 cash for the down payment, and finance the other $240,000 independently.

Take note that the LTV for non-individual borrowers is 15%.

Now try another scenario on your own:

  • Age: 45 years old;
  • Second home loan;
  • Private property valued at $1,500,000; and
  • Loan tenure of 30 years

What’s the LTV? How much can you borrow and how much cash do you have to come up with for the down payment?

This is just one of the many aspects of a mortgage loan. Contact Us if you are keen to learn more about how you can obtain the best mortgage loan and save up to thousands of dollars.