When individuals or businesses in Singapore require immediate funds to bridge financial gaps, cover expenses, or facilitate property transactions, bridging loans can be a viable solution.
Bridging loans serve as short-term financing options that “bridge” the gap between the purchase of a new property and the sale of an existing one.
How much can I borrow as a bridging loan in Singapore?
The amount you can borrow as a bridging loan in Singapore depends on various factors such as the value of the property you intend to sell, the loan-to-value (LTV) ratio offered by the lender, and your ability to repay the loan.
Bridging loans are typically short-term loans designed to provide temporary business financing until a long-term funding source becomes available, such as the proceeds from selling a property.
In Singapore, the maximum LTV ratio for bridging loans is typically around 80% of the value of the property you are selling.
This means that if your property is valued at $1,000,000, you may be able to borrow up to $800,000 as a bridging loan.
However, it’s important to note that lenders may have their own criteria and may consider other factors such as your creditworthiness and income stability when determining the loan amount.
It’s advisable to consult with banks, financial institutions, or licensed moneylenders in Singapore to discuss your specific situation and get accurate information regarding the business loan amount you may be eligible for.
They will assess your circumstances and provide you with the appropriate loan options based on their lending criteria.
Factors which determine how much can borrow as a bridging loan in Singapore
We will explore these factors and shed light on the borrowing limits associated with bridging loans in Singapore.
Loan-to-Value (LTV) Ratio
One crucial factor that determines the amount you can borrow as a bridging loan is the Loan-to-Value (LTV) ratio.
LTV ratio represents the percentage of the property’s value that lenders are willing to lend. In Singapore, the maximum LTV ratio for bridging loans is typically around 80% of the property’s value.
This means that if your property is valued at SGD 1 million, the maximum bridging loan amount you can obtain would be around SGD 800,000.
Creditworthiness and Income
Another vital consideration when determining the borrowing limit for a bridging loan is the borrower’s creditworthiness and income.
Lenders assess the borrower’s credit history, credit score, and income stability to evaluate their ability to repay the loan.
A strong credit profile and stable income increase the chances of securing a higher bridging finance amount. Conversely, a weaker credit history or unreliable income may lead to a lower borrowing limit.
Property Valuation
The valuation of the property plays a significant role in determining the amount you can borrow as a bridging loan.
Lenders typically require a professional valuation report to assess the property’s worth accurately.
The valuation report considers factors such as the property’s location, condition, size, and market trends.
Based on this valuation, lenders determine the maximum loan amount they are willing to offer.
Loan Tenure
The loan tenure, or the duration of the bridging loan, is also a factor that affects the borrowing limit.
In Singapore, bridging loans typically have short tenures, ranging from a few months to a year.
Generally, lenders are more willing to lend larger amounts for shorter loan tenures. As the loan tenure increases, the maximum borrowing limit may decrease due to the higher risk involved.
Lender’s Policies
Different lenders may have varying policies and criteria for bridging loans. Some lenders may have higher maximum borrowing limits compared to others.
It is essential to research and approach reputable lenders who specialize in offering bridging loans.
Consulting with multiple lenders and comparing their terms, interest rates, and borrowing limits can help you find the most suitable option.
Interest Rates
Interest rates play a significant role in determining the borrowing limit for bridging loans.
The interest rate charged by the lender affects the total cost of borrowing and the affordability of the loan.
Generally, bridging loans tend to have higher interest rates compared to traditional mortgage loans.
The higher the interest rate, the lower the borrowing limit may be, as lenders take into account the borrower’s ability to service the loan.
Repayment Ability
Lenders assess the borrower’s ability to repay the bridging loan within the agreed-upon period.
They consider the borrower’s current financial obligations, income, and overall repayment capacity.
If the lender determines that the borrower’s income is insufficient to cover the repayment of the loan, they may offer a lower borrowing limit or decline the loan application altogether.
Exit Strategy
Having a solid exit strategy is essential when applying for a bridging loan. An exit strategy is a plan that demonstrates how the borrower intends to repay the loan when it reaches maturity.
This plan could involve selling the property, refinancing with a long-term mortgage, or securing funds from other sources.
Lenders consider the viability and feasibility of the borrower’s exit strategy when determining the borrowing limit.
Property Type
The type of property being used as collateral for the bridging loan can also impact the borrowing limit.
Lenders may have specific policies regarding certain property types, such as residential properties, commercial properties, or land.
The marketability and liquidity of the property are key considerations. Properties that are in high demand and have a strong resale value may result in higher borrowing limits.
Additional Collateral
In some cases, borrowers may be able to increase their borrowing limit by offering additional collateral or security. This could be in the form of other properties, investments, or other valuable assets.
By providing additional security, borrowers demonstrate their commitment to the loan and mitigate the lender’s risk, potentially allowing for a higher borrowing limit.
Conclusion
Bridging loans in Singapore provide valuable short-term financing options for individuals and businesses.
The amount you can borrow as a bridging loan depends on factors such as the Loan-to-Value ratio, creditworthiness, income stability, property valuation, loan tenure, and lender’s policies.
Understanding these factors and conducting thorough research can help you determine the maximum borrowing limit available to you.
It is advisable to consult with financial professionals or mortgage advisors to assess your specific situation and find the best bridging loan option that meets your needs.
