Financing decoded: LTV, TDSR, MSR & CPF

A buyer's budget is never just the price tag. Four separate rules — set by MAS and enforced by every lender — cap what a purchaser can borrow and how much cash they must find. The exam tests whether you can apply all four together and know which one bites first.

• •Loan-to-Value (LTV) — the maximum loan as a percentage of the property's price or value. It sizes the loan and fixes the minimum cash/CPF downpayment.
• •Total Debt Servicing Ratio (TDSR) — caps monthly repayments across ALL debts at 55% of gross monthly income.
• •Mortgage Servicing Ratio (MSR) — a stricter 30% cap that applies ONLY to HDB flats and ECs bought from a developer.
• •CPF usage rules — govern how much Ordinary Account savings can go toward the purchase, driven by the property's remaining lease and the buyer's age.

These are macroprudential tools: they exist to stop over-leverage, cool speculation, and protect buyers (and the banking system) from a downturn. In a scenario question, the borrower's true ceiling is the LOWEST amount that all applicable rules permit — never assume the LTV maximum is achievable until you have also cleared TDSR/MSR.

LTV is the headline limit. It depends on how many outstanding housing loans the borrower already has, the loan tenure, and the borrower's age at loan end.

• •1st housing loan: up to 75% LTV — and at least 5% of the price must be paid in CASH (the remaining 20% may be cash or CPF).
• •2nd housing loan (one existing): up to 45% LTV.
• •3rd or subsequent housing loan: up to 35% LTV.
• •HDB concessionary loan: 75% LTV (cut from 80% on 20 Aug 2024).

Two conditions push the LTV DOWN to a reduced band. For the first bank loan the 75% falls to 55% if EITHER the loan tenure exceeds 30 years (more than 25 years for an HDB flat) OR the loan period extends beyond the borrower's age 65. The 45%/35% tiers reduce to 25%/15% under the same triggers.

Lenders also apply a mortgage stress test: they assess repayment ability using a floor interest rate of 4% for residential property and 5% for non-residential — even when the actual offered rate is far lower. This inflated rate is what feeds the TDSR/MSR calculation, so it directly shrinks the loan a borrower qualifies for.

Trap to file away now: LTV is computed on the LOWER of price or valuation, whereas stamp duties use the HIGHER. Mixing these up is a classic lost mark.