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Difference Between Loan to Value Ratio of Industrial Property Vs Residential Property

Difference Between Loan to Value Ratio of Industrial Property Vs Residential Property

As we know residential properties may consists of either HDB or private properties and the loan to value ratio can go up to a maximum of 80% for HDB loans and up to a maximum of 75% for bank loans.

Loan to Value Ratio for Industrial Properties

Unlike residential properties, banks typically grant a maximum loan to value of about 80% for industrial properties, subject to the bank’s assessment and review based on the financial documents submitted by the company.

Down Payment for Industrial Properties in Cash

For residential properties, you may already be aware that you are able to use CPF funds to fund part of the residential property purchase.

However for industrial properties, the down payment of 20% has to be paid in cash if your company has been granted an 80% loan by the bank. No CPF funds may be used for industrial property purchases.

How About Buying an Industrial Property With Little or No Money Down?

You may have heard of this term, ‘buying an industrial property with little or no money down.’ Is that even possible, you may be wondering.

In a scenario whereby the bank or financial institution agrees to grant your company a working capital loan subject to the lender’s review of your company’s financial statements, your company may end up having the remaining 20% downpayment being funded by the working capital loan. In this way, your industrial property purchase is almost fully funded by loans and in fact it sounds like little or no money down. You may note that the monthly instalments for these loans still have to be repaid to the financial institution.

Of course, do not forget that your company will have to pay for the applicable buyer stamp duty for an industrial property just like any other properties in Singapore.

However, you may note that the buyer stamp duty rates for industrial properties may differ from the buyer stamp duty rates for residential properties depending on the purchase price of the property.

To end off, it is always advisable and wise to exercise prudence when taking up leverage. By assessing the interest rates, monthly instalments and by keeping emergency funds in place, your company is likely to have a better peace of mind.