Purchasing your first home can be confusing as there are many viable home loan options available with complicated financial jargon. Some homeowners will be worried and wonder whether “can I take home loan after personal loan”?
What is a home loan?
A home loan is given out either by a bank or housing development board (HDB) for the purchase of your property. HDB home loans are only available for the purchase of HDB properties, which are issued at a concessionary interest rate subject to HDB’s prevailing rates. The Monetary Authority of Singapore (MAS) curbs the housing loans as a safety net for Singaporeans not to over-borrow.
Common home loan packages offered by banks
The interest rates for these loans are fixed for a certain time frame anywhere from 1 to 5 years. It gives borrowers a piece of mind as their monthly repayments are not affected by the volatility in the global or domestic markets. Hence, such mortgages come with higher interest rates.
Factors affecting home loan quantum
The loan to value limit refers to the maximum amount that you are allowed to borrow from a financial institution or HDB for a home loan. For HDB, the LTV is up to 90% of your first property value and for banks, it’s capped at 75% for the first loan. The actual quantum will depend on your financial capability to repay the loan, which is measured by the TDSR and MSR.
This refers to the percentile of your income that goes to monthly home loans payments and it should not exceed 30%. This ratio only applies when purchasing a HDB flat or an executive condominium. The formula is as follows:
(Total monthly home loans/gross monthly income) x 100% <=30%
TDSR refers to the portion of your monthly gross salary that is utilised for paying all monthly loan obligations (including credit cards, education loans, personal loan, etc). It must not exceed 60% of your monthly income. The formula is as follows:
(Total monthly all loan obligations/gross monthly income) x 100% <=60%
Important tips when considering ‘Can I take home loan after personal loan’?
i) Plan well
Draw up a budget before purchasing a property so that you can work out the loan requirements. Calculate the amount of home loan needed for the purchase before applying for a personal loan from a licensed money lender to ensure that your TDSR does not exceed the required limit. If necessary, source for a personal loan with the lowest interest rates and a longer tenure so that you do not default on payments. With a lower monthly instalment, you will be able to secure a higher home loan and meet the TDSR requirements.
ii) Healthy credit score
Make sure that you have a healthy score card as lenders will request it before approving any loan. This scoring is extremely important especially if you are taking a home loan after a personal loan. If your payment history is bad due to late or partial payments, this will affect your credit score tremendously, and you will face problems getting a home loan.
iii) Joint loan application
Applying for a home loan jointly with your spouse will boost your repayment capabilities and also build the confidence of the licensed money lender. When you apply as a couple, naturally you will get a higher loan quantum based on the combined monthly income. This in return, will reflect your ability to make timely payments as the earning power is much higher. Hence, your chances of taking a home loan after a personal loan are much higher via this mode of application.
iv) Debt to Income Ratio
Apart from maintaining a healthy score, lenders will also take a look at your debt to income ratio (TDSR). Observe the first rule of smart borrowing which is to only borrow what you need. Nowadays, it’s easy to take numerous loans online with instant disbursement of funds. Ensure that your debt to income ratio is within acceptable levels if you are planning to take a home loan after a personal loan in the future.