Can a self-employed or entrepreneur get a mortgage loan?
If you are self-employed or an entrepreneur, you need to declare your annual income to IRAS.
Then you will receive a notice of assessment for the year.
It is hard for the bank to assess your monthly income because the income may be unstable.
The bank may ask you to submit a few years of notice of assessment. Your income assessment will be subjected to a “haircut” of 30% off your gross income.
The maximum duration of a loan is 30 years, and up to 65 years old.
Let’s do a computation for your asset planning using this calculator.
Let’s suppose you take a loan at the age 35 for 30 years until you reach 65 years old.
Let’s suppose your monthly salary is $5K.
The scenario for an employee and you want to borrow for a private condo”
The current TDSR is based on 55% of your monthly income.
That means you can borrow up to a maximum of $612K
For a self-employed or entrepreneur, the maximum loan is $228K
This is because the bank discount 30% off your $5K income (hair cut)
That means only $3.5K is being assessed every month.
The scenario for an employee:
If you want to borrow for a HDB unit.
The maximum loan is $299K (based on MSR ruling)
HDB allows you to borrow up to 25 years.
The scenario for self-employed or entrepreneurs for a HDB unit.
You get $90K less. Your maximum loan is $209K.
The simple answer is ‘Yes’. You can get a mortgage loan.
But you have to factor in the ‘haircut’ of 30%.
Your loan will be less than most people.