I often receive questions from readers who look for local mortgages in Asia, not rarely in Singapore. Not only are there people with financial restrictions, I also come across wealthy investors who own a dozen of properties or more in different countries, looking for options to leverage their money.
Being one of the most economically free and transparent countries in the world, you have significantly more loan options in Singapore, compared to developing neighbours like Thailand and Cambodia.
Therefore, I decided to write this guide where you’ll learn the basics when applying for a property loan as a foreigner in Singapore.
Buying real estate as a foreigner in Singapore
It’s generally easier for local citizens and foreign PR holders to be granted property loans. Being a non-resident foreigner will add on some requirements. For example, verification of proof of incomes, the types of property you can buy and more (non-resident foreigners can only buy private properties, whilst PR holders can buy HDB apartments and have easier access to landed property).
You’ll also need to seek permission from the Singapore Land Authority, before buying property as a non-resident foreigner. PR holders and local citizens are exempted from this requirement.
How high property loans can foreigners get in Singapore?
I’ve done my research and been in contact with several Singaporean banks, including DBS, OCBC and UOB, just to mention a few. The mentioned banks are, in my experience, more generous when it comes to granting overseas property loans, local property loans and when opening bank accounts. Maybe this is something you’ve noticed yourself.
When applying for a loan, one of the most important terms paying attention to is the so called LTV ratio. The LTV is shown as a percentage and the amount that the bank will grant you in loan, multiplied by the purchase price, or the valuated price, whichever is higher.
So how high is the LTV, or should I say, how much will the banks generally be able to pay?
The LTV is normally 60-80% for local buyers and PR holders. There are some banks, for example OCBC, that offer an equally high LTV to non-resident foreigners, PR holders and locals (more about that later), whilst other banks, like DBS, offer lower rates to non-resident foreigners.
TDSR (Total Debt Servicing Ratio)
Another important term to take into consideration is the TDSR, the Total debt servicing ratio. Simply put, the TDSR is measured as a percentage, and the maximum debt obligation a borrower can have in relation to existing debt obligations and the income.
The TDSR is normally calculated as follows:
(Annual Mortgage Payments + Property taxes + Other debt payments) / Gross Family Income
The maximum TDSR, as announced by the MSA (Monetary Authority of Singapore) in March 2017 is 60%. According to research, the updated TDSR had lower impact to foreign buyers compared to local citizens.
Process when applying for a property loan in Singapore
The process is fairly straightforward when applying for a loan, and very similar between non-resident foreigners, PR holders and local citizens. Below I’ve included a schematic overview of the process that derives from DBS website (the process might differ slightly from other banks):
A). Get in touch with a handful of local banks and see what options you have. I’ve already done some of the work for you, but it’s always good to get personal advice and the latest information.
(It’s not rare that the banks will require that you open a local bank account and become a Premier Customer to obtain a loan, which often means that you need to make a transaction of around SGD 200,000 to your new account. You often need to visit the bank in person, to finalize the loan).
B. A dedicated customer manager will help you to evaluate if you’re eligible to obtain a loan. The customer manager will be able to give you an IPA (In-Principle-Approval) which shows the maximum loan amount the bank can give you.
Your source of income, employment status, age and residency status will highly determine whether you’re capable of receiving a loan, and the loan amount.
Be sure to receive IPA’s, prior to signing the OTP (Offer To Purchase). Worth mentioning is that you normally pay an Option Fee equal to 5% of the purchase price, or a fixed fee of up to USD 1000, before signing the OTP. If you buy off-plan, you initially pay a Booking fee that’s normally 5%.
C. You can apply for property loans to a number of banks at the same time, the documents required can differ depending on the banks. Normally, there are some standardized documents you need to provide, for example:
- A filled in application form to the bank
- The OTP
- Proof of income (bank statements)
- Employment status/Employment contract
- Statements & other financial commitments
- Information about the property
- Valuation report
Confirm with your bank what’s needed up front.
D. When you’ve secured a property, you can continue and Sign the Letter of Offer from the bank.
E. Meet with a local conveyancing lawyer to finalize the purchase and sign the Sales & Purchase Agreement. In the case you buy directly from a developer, the developer is normally tied up with a selected bank.
F. Pay the stamp duty within 14 days after you’ve signed the OTP.
G. Pay a remaining 15% of the down payment 8 weeks after the OTP is signed.
H. Pay the remaining down payment and legal fees. Your conveyancing lawyer can confirm whether you need to provide any other additional documents from the time he or she is appointed.
DBS property loans for foreigners in Singapore
DBS is a local Singapore bank and one of the biggest in Southeast Asia, operating in a number of countries in the region.
According to DBS, you don’t necessarily need to be a local citizen or PR holder, but it’s preferable. Even if you’re not a PR holder, having an employment in Singapore can increase your chances of getting a loan.
The LTV for non-resident foreigners is slightly lower compared to PR holders and local citizens and set to 50-60%. You also need to open a local bank account with DBS and visit the bank in person, before the loan can be granted.
You can visit DBS’ website or call them directly for more information.
OCBC property loans for foreigners in Singapore
OCBC is another major bank operating in Singapore. According to the verbal information I received by phone, you need to open a local loan account and a deposit account. You need to make a transaction of SGD 200,000 to the latter one, in order to become a Premier Customer.
The LTV is a bit more generous for non-resident foreigners and equal to PR holders and local citizens, which is up to 80% of the purchase price or the valuation, whichever is lower.
The same as it goes with DBS, you need to visit the bank in person and it’s more difficult if you’re a non-resident. But once you’re in, the same “packages” apply, for example, the interest rates are the same.
Worth mentioning is that there must be a remaining lease of at least 60 years to get a loan with OCBC.
I recommend you to visit OCBC’s website or contact them directly for more information.
Maybank property loans for foreigners in Singapore
Maybank was originally established in Malaysia, not surprisingly, they also have offices in Singapore. According to Maybank, you need to open a local bank account and visit a local branch in person to get a property loan.
The loan tenure is set to maximum 35 years and the LTV ratio set to 60-80%.
Maybank is also one of a handful bank that offers so called overseas property loans to Singapore nationals or PR holders who wish to buy properties in countries like the UK and Australia.
Other banks located in Singapore
In addition to the above mentioned banks, you can also contact any of the following banks that have offices in Singapore:
- Bank of China
- Standard Chartered
- ANZ Bank
Singapore banks offer loans to both resident and non-resident foreigners who wish to buy property locally. Some banks offer better rates and tenures to citizens and PR holders, while others don’t treat investors differently.
Overall, being a PR holder, or at least employed locally, will increase your chances of obtaining a loan. You’ll also get increased access to more property types, like landed houses and HDB apartments.
The LTV ratios normally stretch from 60-80%, or sometimes from 50-60% for non-resident buyers. You should also take the TDSR (Total Debt Servicing Ratio) into consideration, which limits your debt obligation, in relation to your income.
For more information regarding the loan options you have, I recommend you to contact the biggest banks for up to date information.