How To Calculate Housing Loan Monthly Installment In Singapore
March 17, 2023
Are you planning to take out a loan to purchase a new home for your family?
You will definitely need to understand how to calculate housing loan monthly installment. This will help you to plan your monthly income and repay your loan on time.
The calculation will also allow you to know the amount you can borrow depending on your financial capability.
Continue reading this article to get a breakdown of how much you can borrow for your new home, how much you can afford to pay, how to calculate the monthly installment and more.
How Much Loan Can You Borrow For Your New Home?
Purchasing a home in Singapore can cost up to thousands of dollars. Understanding how much you can borrow from a lender will help you choose a home within your budget.
For banks, you can borrow up to 75% of your property’s value if it is your first home loan. If you take out a second one, you can get up to 45%, while with a third one, you can borrow up to 35%.
On the other hand, if you are borrowing a HDB Concessionary loan, you can qualify for up to 80% of your home’s purchase price.
It is important to note that your Total Debt Servicing Ratio can influence the amount you can borrow. Therefore, it is not guaranteed to qualify for the maximum loan amount.
You can find a property loan calculator in Singapore to determine how much you can borrow depending on your monthly income.
What Is A Mortgage Repayment?
Mortgage repayment, also known as monthly repayment, is the payments you make every month to cover the cost of a loan. This includes the principal amount and the total interest. The amount you pay monthly depends on your agreement with your lender.
The more you make your mortgage repayment per month, the more your mortgage loan balance decreases.
This will also depend on your loan tenure. Generally, the loan term for private properties is 35 years, while that of HDB flats is 30 years.
As you learn how to calculate housing loan monthly installment repayment, note that the initial repayments mainly cover the interest. Therefore, if you sell your home in the first few years, you will owe your lender a significant amount.
The best thing is that you can use a mortgage repayment calculator in Singapore to find your mortgage repayment amount.
How Much Mortgage Payment Can You Afford?
This is an important question to ask yourself before you apply for a mortgage. This is because it will allow you to borrow an amount you can repay comfortably.
Usually, your housing loan should be at most 2.5x your annual gross income. For example, if you earn $150,000 per year, your mortgage should be about $375,000.
However, this is a general guide. If you can afford a higher amount, you can borrow. All you need to do is ensure you can repay the loan on time.
How To Calculate Housing Loan Monthly Installment
If you are wondering how to calculate housing loan monthly installment, relax because it is straightforward. The process is simple, with a monthly installment calculator in Singapore.
The good thing is that you can find this calculator online from financial experts such as banks and licensed money lenders.
What do you need to calculate your home loan repayments? You require the following:
- Your loan amount – This is the amount you want to borrow from a lender, for example, $500,000.
- Interest rate – This is the interest that you will be charged, for example, 3%. Your loan can have a fixed interest rate or a variable one. A fixed interest rate doesn’t change for the entire loan term, while a variable one changes.
- Loan tenure – It is the period in which you should pay your loan, for example, 30 years.
So how do you calculate your monthly installment?
Here are the steps:
1. Find a loan repayment calculator online, such as the CPF loan calculator by CPF Board
2. Provide the amount you want to borrow, the interest rate, and the loan tenure. You may also be required to provide the type of property and its building status.
3. The Singapore property loan calculator will generate the figures automatically. This will take one to two minutes.
How To Use A Mortgage Calculator
A mortgage calculator is a tool financial experts use to explain home loan details to borrowers. You can also use it to understand the details of a mortgage before borrowing.
Why do you need to use this calculator?
When you know how to calculate housing loan monthly installment, you can plan your income accordingly and clear your loan as agreed with your lender.
To use it, key in your loan amount, its interest rate for at least the first five years, and the loan tenure. The results will be provided in a table to give you a better understanding of your loan.
If it is your first time using a home loan calculator in Singapore, it can be confusing to figure out the details. However, here are the results you can expect from a mortgage loan calculator:
Housing Loan Balance
This is the principal amount. If you are buying a new home, this is the amount you are borrowing, but if you are refinancing a loan, it is the outstanding balance on your current home loan.
The housing loan balance is also the amount refinanced by your lender when taking out a new loan.
This is the amount you pay per month. If the loan interest changes, your monthly installment should also be adjusted. In this section, you will find the adjustments for the principal amount and the interest on your loan.
Interest And Principal Amount
From the monthly installment repayments reflected by your calculator, you can find how much covered the principal and how much went to the interest.
You can get your outstanding loan balance at different periods and how a lender has charged you the interest.
As a result, if you are thinking of repaying your loan, you can understand the best time to do so.
Housing loans have additional charges such as taxes and insurance. You can use a Singapore property loan calculator to determine the extra cost you will incur during the loan tenure.
An amortisation schedule illustrates the results of a calculator in a table to help you understand each detail of your housing loan.
With this table, you can know the payments you need to make in the future and your outstanding loan balance in the future. As a result, you will get the total interest you will pay to service your loan.
Outstanding Amount And Cumulative Interest Paid
Lastly, a calculator will help you with the outstanding principal amount you owe a lender at any point in the future, plus the total interest you have paid.
The cumulative interest will increase with time, while the outstanding loan balance will decrease. Once you finish paying your loan, the outstanding principal you owe will be zero.
Finding Your Housing Loan Monthly Installment In Singapore
Before you apply for a housing loan, the best thing to do is to understand the amount you need per month to pay the loan. Therefore, you should know how to calculate housing loan monthly installment.
The good thing is that you don’t need to be a maths guru because a loan repayment calculator makes it easy.
You only need to know the amount of loan you want to borrow, the interest rate, and the loan tenure. When you key in this figure, the calculator will generate your monthly installment amount within a minute or two.
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