How Do You Calculate Your Housing Loan?

Dexter Lee October 6, 2022

How Do You Calculate Your Housing Loan?

Purchasing a home for yourself is a dream come true. However, this can be impossible without a proper mortgage plan.

Getting a home loan is an important financial commitment that normally lasts for many years.

So as a borrower, you should conduct extensive planning before committing to this obligation.

Many are looking for mortgage opportunities to achieve this dream of obtaining a home. However, a home loan can be a complicated process for those who are unsure of where to start.

A home loan calculator is the simplest way to plan your home loan commitment.

If you are excited about getting a new home in Singapore, you can easily perform the sums of your new home with a mortgage calculator.

This article will show you how to calculate housing loan so you can manage your expenses and know how much you can afford for your home.

Loan Amount And Tenure

When you take a home loan from your money lender, you must make monthly repayments over a certain period until you have fully paid the principal amount and accrued interest to the lender.

As long as you make your monthly repayments, your mortgage balance will reduce and be repaid by the end of the month.

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    A major factor influencing a person’s loan tenure and the amount is his or her age. The younger a person is, the longer the loan tenure.

    The law has capped maximum loan tenures for HDB flats and private properties at 30 and 35 years, respectively.

    You should remember that the initial repayments are mainly for the interest.

    Therefore, if you are considering selling your property in the first few years, you will note the amount you owe to the lender will not have decreased significantly.

    You can use a mortgage calculator in Singapore to check various options by changing sums, as well as the rate of interest, and loan tenure.

    To understand the break-down amount of your home loan, you need to calculate the monthly installments.

    Another factor that influences the loan tenure and amount is your income and financial obligations.

    When calculating your maximum home loan amount, banks will consider the ratio of your debt to income.

    This is known as the Total Debt Servicing Ratio (TDSR), which is capped at 55% of a borrower’s gross monthly income.

    When purchasing an HDB property, the bank will need to calculate your Mortgage Servicing Ratio (MSR), which is capped at 30% of your gross monthly income.

    The MSR calculation is based on the principal amount and the combined monthly gross income.

    In other words, the MSR (for HDB flats only), loan tenure, and a medium-term of 3.5% interest rate and TDSR influence your maximum loan amount.

    Calculating The Value Of Your Property

    If you plan to make your first move soon, you should know the value your property can fetch on the market.

    To get an estimation of the value of your home, you need to get a property valuation.

    Most licensed money lenders offer a mortgage calculator on their websites, which shows an approximation of your home’s value.

    They normally derive this value by including the price of properties similar to yours, and those bought and sold in your locality.

    HDB owners can also conduct an approximate valuation by researching historical transaction data of properties using the calculator.

    If you want actual values, you can consult a specialist from a licensed money lender. He or she will visit the location of your property, conduct an assessment, and appraise its value.

    When calculating actual valuations for HDB and private properties, specialists will base their study and appraisal on various factors such as:

    • Location
    • Built-up area
    • Land size
    • Building structure
    • Age and condition
    • Orientation and location in the block
    • Interior furnishings
    • Number of rooms
    • Vehicle accessibility
    • Urban Redevelopment Authority Zoning

    When this assessment is done, the specialist will issue a valuation report showing all the findings and the market value of your home.

    If you need an accurate valuation, get the services of different valuers and compare the values.

    With this, you can narrow the range to obtain the average price. Different valuers charge differently depending on the type of property.

    How Much Mortgage Can You Afford?

    You can use a housing loan calculator to calculate how much mortgage you can afford.

    When doing this, consider some essential items such as your household income, monthly debts, and savings available for a downpayment.

    As a buyer, you need to have some level of understanding about your monthly mortgage payments.

    While your monthly dents and household income may be relatively stable, unplanned expenses and spending may affect your savings.

    A good affordability proposition is to reserve three months of payment, including your monthly payments and other monthly debts.

    This can enable you to cover your mortgage payment in case of an unprecedented crisis. Other factors that affect affordability are as follows:

    • Monthly debts and expenses: These are the payments you make every month. They may include credit card payments, car loans, utilities, groceries, and student loans, among others.
    • Income: This refers to what you earn every month – it includes your salary or money you get from investments. Your income is the main determinant of what you can afford to pay monthly.
    • Credit report: This includes your credit score and the debt you owe to a lender – and determines if a lender will accept your loan application.
    • Cash reserves: This refers to the amount of funds you have ready for making the downpayment and closing costs. Your investments and savings, among other available resources, can help you out here.

    The mortgage calculator can provide you with the correct price range, depending on your situation.

    More importantly, it considers your monthly obligations to check if a home is within your financial reach.

    How To Calculate Your Mortgage Payment

    The TDSR regulates a Singaporean’s loan-to-income ratio. It states that all your monthly debt expenses should not exceed 55% of your income.

    It is calculated by dividing your debt obligations by your gross monthly income and multiplying by 100.

    An important factor your lender uses to calculate the loan amount you can borrow is the debt-to-income ratio. This compares your total monthly debts to your monthly pre-tax income.

    You may get a higher ratio based on your credit score, but your housing debts shouldn’t exceed 28% of your monthly income.

    For instance, if you have a monthly mortgage payment, including taxes and insurance, of $1,200, and your monthly income is $4,300 before taxes, your loan-to-income ratio is 28% ($1,200/$4,300).

    You can calculate the reverse of this process to identify how much your housing budget is – just multiply your income by 0.28.

    What Is The Maximum Loan You Can Get?

    After planning to purchase a house through a mortgage, the common question for home buyers is: “how much home loan can I get?” or “how do I calculate a housing loan?”

    Solving this question depends on two factors.

    Firstly, the maximum home loan size you can get depends on how much you can afford based on your financial situation.

    Secondly, the loan amount you can get depends on how much banks or licensed money lenders are willing to give you based on several indicators such as finances and regulations.

    However, before deciding on the maximum loan you can get, you should know how much you can afford to pay for the new home in terms of upfront and ongoing costs.

    After finding out how much you can afford, you can decide how much you can and should borrow.

    As a result, you should study the lending regulations of money lenders such as banks and HDB.

    These lenders take into account several things before deciding how much they can lend you as a borrower. They include:

    Total Debt Servicing Ratio (TDSR): As mentioned, this ratio considers your monthly debts such as home loans, credit cards, car loans, and other debts. Its current limit is capped at 55% of your monthly debt.

    This indicates that you cannot borrow a home loan that will cause your monthly loan to exceed 55% of your income.

    Mortgage Servicing Ratio (MSR): This measures the amount of your gross monthly income used to pay your home loan. It is calculated by dividing your monthly mortgage payments by your gross monthly income.

    Loan-to-Value Ratio: This ratio checks the size of the loan in relation to the home’s value. To calculate the LTV ratio, divide the principal amount you want by the property’s purchase price.

    Get Help With Calculating Your Housing Loan

    If you need a bank HDB loan calculator, note that for an HDB Concessionary loan, you can borrow up to 90% of your home’s purchase price.

    The maximum loan amount a bank offers depends on the number of housing loans you currently have.

    You can get up to 75% of the home purchase price for the first housing loan, 45% for the second housing loan, and 35% for the third housing loan.

    A mortgage can be an overwhelming process, and if you don’t know enough about this kind of loan, you may miss finding a good deal even if you know how to calculate housing loan.

    Choose a loan calculator in Singapore to compute your monthly installment for your home. You can also get a CPF housing loan calculator to know the payments you will make using a combination of cash and CPF savings.

    However, you can easily find help at CreditMaster as we offer flexible loans that require minimal documentation.

    Getting a mortgage loan depends on your situation, which varies from time to time.

    You can contact a mortgage specialist at CreditMaster, as we can easily check your needs and offer effective advice. Or apply for a loan with us now.

    Dexter Lee

    Born with a pen in one hand and a keyboard in the other, Dexter's been crafting words into beautiful prose since he was old enough to scribble on his walls (much to his mother's chagrin). He's a self-proclaimed pun master, often leaving his coworkers in stitches with his clever wordplay. He's been known to strike up conversations with strangers and turn their stories into captivating content that keeps readers coming back for more. Despite his unconventional approach to life and work, Dexter takes his job as a content manager very seriously. He knows that every piece of content he produces has the power to make a difference in someone's life, and he's committed to using his words for good.

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