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A bank loan on an HDB flat over 25 years attracts the reduced LTV

A worked RES examination question on loan tenure and weighted age, from our Paper 2 bank — with the rule it turns on, and why each of the four options is right or wrong.

Paper 2Lesson 9Loan tenure and weighted ageFree — no sign-up

The question

Three clients ask their salesperson, in the same week, for "the longest loan the rules allow". Mr Ismail is taking an HDB housing loan on a resale flat. Ms Pereira is taking a bank loan on a resale flat. Mr Danesh is taking a bank loan on a freehold condominium. All three are in their early thirties.

Consider the following statements.

  1. (i) The maximum tenure available to Mr Ismail is 25 years.
  2. (ii) The maximum tenure available to Ms Pereira is 30 years.
  3. (iii) The maximum tenure available to Mr Danesh is 35 years.
  4. (iv) A bank loan on an HDB flat taken over a tenure exceeding 25 years attracts a reduced loan-to-value limit.
  1. A. (i), (ii) and (iii) only
  2. B. (i), (ii) and (iv) only
  3. C. (ii), (iii) and (iv) only
  4. D. (i), (ii), (iii) and (iv)

The answer, and why

Answer: D

The rule. Maximum tenures: HDB housing loan 25 years; bank loan on an HDB flat 30 years; bank loan on private residential property 35 years. A bank loan on an HDB flat over 25 years attracts the reduced LTV.

Why D is correct. All four are true — the three tenure caps and the reduced-LTV trigger for a bank-on-HDB loan beyond 25 years.

The other options.

  • A drops the true (iv), the reduced-LTV point.
  • B drops the true (iii), the 35-year private cap.
  • C drops the true (i), the 25-year HDB-loan cap.

Exam note. 25 / 30 / 35 — HDB loan, bank-on-HDB, bank-on-private — and stretching a bank-on-HDB loan past 25 years costs LTV.

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