Many home buyers assume their bank loan amount is fixed, as though the number is carved in stone the moment an In-Principle Approval (IPA) is issued. In reality, loan eligibility is highly sensitive to how banks assess income, liabilities, and risk. 2 buyers earning the same salary can walk away with very different loan amounts, which can be confusing, and occasionally rage-inducing.
In a high property price environment, small adjustments can have an outsized impact. Clearing a modest loan, restructuring repayments, or simply applying at a better time can shift loan eligibility by tens or even hundreds of thousands of dollars. These changes don’t require you to be good at financial gymnastics, but an understanding of how banks actually think.
The goal is not to borrow blindly or max out your loan just because the number looks impressive on paper. Your aim should be to structure your finances in a way that satisfies bank criteria and lets you sleep soundly at night; here’s how you can go about it:
Clean up your credit profile early
Image credit: TheSmartLocal
Banks always assess risk before they assess loan size.
Before a bank worries about how much it can lend you, it asks a more basic question: How likely is this person to pay us back without drama? Your credit profile plays a big role in answering that question.
Revolving balances where only minimum payments are made are one of the biggest red flags. Carrying over your balances month after month suggests reliance on credit rather than cash flow, which is something banks notice very quickly. Late payments are even more damaging. A single missed payment in the last 6 to 12 months can materially weaken your profile, even if everything else looks fine.
Similarly, multiple credit applications in a short period may suggest financial stress rather than financial planning.
Cleaning up your credit profile early doesn’t just improve your interest rate. It signals reliability, and reliable borrowers tend to get more flexibility when it comes to loan size.
Reduce hidden liabilities before applying
Many buyers focus on large-ticket loans such as cars or study loans, but underestimate the impact of smaller, recurring obligations like personal loans. Under Total Debt Servicing Ratio (TDSR) rules, all monthly debt commitments count, and it doesn’t matter how much or what it’s used for.
This is why clearing smaller liabilities often produces a surprisingly large boost in loan eligibility. It’s not dramatic, but it’s effective, which is exactly what banks like.
Understand how TDSR actually works
Most buyers know the phrase “55% Total Debt Servicing Ratio (TDSR)”. Fewer know what it actually means, beyond a vague sense that it is important and not to be exceeded.
TDSR represents the percentage of your gross monthly income that goes towards servicing all debt obligations, including the home loan you are applying for. While the regulatory cap is set by MAS, banks apply their own internal assumptions when assessing income quality and repayment risk.
Fixed income is straightforward. Variable income is not. Bonuses, commissions, and incentives are typically discounted, often up to 30% because banks prefer income they can predict, not income that appears only when the stars align.
Existing loans directly reduce how much you can borrow for housing. This is why paying down a relatively small car loan can unlock a much larger home loan. To the bank, this signals stronger cash flow and better stress-testing ability, both very attractive traits in a borrower.
Choose loan tenure strategically
Image credit: Insight.Out Studio
Loan tenure is one of the quiet heavy-hitters in loan eligibility calculations. A longer tenure lowers monthly repayments, which helps borrowers stay within TDSR limits while borrowing more. For many buyers, extending their tenure from 25 to 30 years can meaningfully increase loan eligibility.
That said, tenure is not a free lunch. Age restrictions still apply, and buyers in their 40s and 50s will find that tenure decisions have a bigger impact on affordability. Maximising their tenure just to increase loan size can backfire if the repayments remain high well into the applicants’ later working years.
Time your application around income stability
Image credit: itsjack
In case you didn’t get the memo, banks love stability. Excitement is for property listings, not income statements.
For salaried employees, consistent employment over the last 6 to 12 months is usually viewed favourably. Sudden job changes right before applying, even with a pay increase, can complicate assessments.
For freelancers and commission-based earners, banks usually look at 2 years of Notice of Assessment (NOA) and prefer income that is smooth rather than spiky. A slightly lower but consistent income often beats a good year followed by a very quiet year.
In some cases, waiting an extra 3 to 6 months before applying for your loan shows stronger consistency, which can increase loan eligibility more than rushing into it.
Compare banks beyond headline interest rates
Focusing only on the advertised interest rate is one of the most common mistakes home buyers make.
All banks follow the same regulations, but they don’t always think the same way. Some banks are more lenient with applicants who have variable income streams, self-employment earnings, or unconventional job histories. Others are stricter about age, tenure, or existing liabilities. As a result, the same borrower profile can receive very different loan offers across banks.
When comparing banks, consider more than just the interest rate:
- Loan quantum: The amount you can borrow can vary significantly between banks.
- Flexibility: Terms and repayment options can affect your financial comfort.
- Assessment style: Some banks are more understanding of non-standard profiles, such as:
- Variable income streams (freelance work)
- Self-employment earnings
- Unconventional job earnings (commission-based)
Use a mortgage broker strategically
Mortgage brokers exist because the system is complicated, not because buyers are lazy. A good broker understands which banks are more flexible for certain profiles, whether that involves variable income, age considerations, or existing commitments.
In most cases, brokers are compensated by banks rather than buyers, and there is no obligation to accept any loan that they offer. Ultimately, this isn’t about gaming the system, but navigating it with better information and fewer surprises.
Tips to maximise your bank loan
Maximising your bank loan starts with understanding how banks assess affordability, not simply stretching to the biggest number possible.
Small financial and structural adjustments can significantly increase loan eligibility without increasing risk. The right loan is not the biggest one you can get; it’s the one that increases your buying power today without turning future you into the one paying for past decisions.
To better understand the financial aspects of buying a flat, you can read these:
- HDB vs bank loan, which is better for you?
- The ultimate guide to getting a mortgage in Singapore
- BTO vs resale: 7 questions to ask to before choosing
Cover image adapted from: Insight.Out Studio, itsjack
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