If you can't afford the full amount of your home, you may need to take out a loan from HDB, a bank or other financial institution. The age of the home buyer will also affect the length and limit of the home loan.
According to MAS, the maximum home loan term allowed is 30 years for HDB flats and 35 years for private homes.
However, if the mortgage term exceeds 30 years or the age of the lender and the loan term exceeds 65 years, the loanable LTV will be reduced from 75% to 55% of the bank's loan limit.
If you intend to apply for a home loan at age 35, you must pay off all your loans before age 65 in order to take advantage of the higher LTV rate.
For example. Person buys a home at age 35 with a 75% loan and can borrow for 30 years. The person buying a home at age 45 wants to take out a loan at 75% and can only take out a loan for 20 years.
In the case of joint lenders, the situation may be more complicated.
For example, if a husband and wife buy a home together or jointly with a father and son, the home loan term will be calculated based on the weighted average age of both of their incomes. This is because it will affect the ability to repay the loan.
The income-weighted average age algorithm is calculated as follows.
Borrower A's age * Borrower B's gross monthly income / (Borrower A and B's gross monthly income
Borrower A's age * Borrower B's gross monthly income / (Borrower A and B's gross monthly income)
In simple terms, the higher the income, the higher the age weight, disregarding the age without income.
The government introduced new rules on May 10, 2019 that allow purchasers up to age 95 to live in a home purchased using CPF savings.
The age of the purchaser plus the remaining deed of the house must be within 95 years in order to pay in full with CPF.
In the case of joint purchases, the younger person's age is taken and if the remaining deed is not sufficient to allow the purchaser to live to age 95, the CPF contribution may still be used, but the amount allowed to be contributed is a fraction of the valuation ceiling, depending on the purchaser's age and the remaining years of the deed.
The government's policy is intended to encourage purchasers to purchase a home with a longer remaining deed than the remaining life expectancy.
The CPF Board wants to do its best to make it a tragic situation for people to grow old only to have their house repossessed because the deed expires and they use their CPF to pay off their mortgage and have no money and no house.
Old houses with good location and collective sale potential are attractive, but young couples in their 20s should not touch old houses. This is because it may not be possible to pay off the loan with CPF.