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Property Loan To Value (LTV) Ratio, Additional Buyer Stamp Duty (ABSD), Initial Cash Outlay Relationship, Progressive Payment For New Development.

 

Project At-A-Glance

  • MAS Home Loan Rules - 29th June 2013
  • ABSD impacting citizenship
  • Loan-To-Value Ratio and Initial Cash Outlay Relationship
  • Summary of Seven Rounds of Cooling Measures
  • Progressive Payment Scheme for New Project

 Registration Of Interest

MAS Home Loan Rules - 29th June 2013

The Monetary Authority of Singapore (MAS) has set new home loan rules that banks have to use a standardised set of guidelines to assess property buyers' eligibility to borrow and discourage lenders from making property loans that result in individual borrowers using more than 60 per cent of their monthly incomes to service debt. Banks will not be able to approve a loan if the monthly repayments of a buyer's total debt obligations exceed 60 per cent of his gross monthly income.

To prevent borrowers from overextending in their property purchases, MAS has also stipulated a floor in calculating interest payable on loans, even if prevailing rates are lower. For residential property loans, the minimum rate is 3.5 per cent, while the rate for non-residential property is 4.5 per  cent.

"The TDSR (total debt servicing ratio) will apply to loans for the purchase of all types of property, loans secured on property, and the re-financing of all such loans," it said.

MAS said the rules will help strengthen credit underwriting practices of financial institutions and encourage financial prudence among borrowers.

MAS will also refine rules related to the application of the existing Loan-to Value (LTV) limits on housing loans.

The bank said these refinements seek to ensure the effectiveness of the loan limits that were put in place to cool investment demand in the housing market.

In particular, they aim to prevent home buyers from circumventing the tighter loan limits on second and subsequent housing loans.

When working out loans to be granted to home buyers, banks will have to consider the monthly repayment for the property loan that the borrower is applying for, plus all his other outstanding debt obligations.
 


What does this mean for those property investor?  

What Happened

The Monetary Authority of Singapore (MAS) has introduced a total debt servicing ratio (TDSR) framework for all property loans granted by financial institutions (FIs) and refined certain rules om LTV limits. The key features are:

 1) FIs factor in total debt obligations when granting property loans,

 2) a medium-term interest rate be applied to property loans (3.5% for residential property),

 3) property loans not exceed a TDSR of 60%,

 4) “guarantors” for a loan not meeting the TDSR threshold be brought in as co-borrowers and

 5) FIs use the income-weighted average age in cases of joint borrowers.

What the Bank Think (extracted from "Sector Flash Note" of CIMB, 30 June 2013)

While more marginal buyers will be removed from the equation and demand will continue to moderate, the Bank believes that a housing collapse is unlikely for a few reasons:

 1) FIs have generally kept to a mortgage servicing ratio (MSR) limit of 30-40%. Guidance from FIs is that average system MSR is c.28-30% and while average TDSR will be higher, they believe this ratio is still substantially lower than 60%,

 2) Our ground checks suggest that while there have been some cases of loans being extended to "guarantors" to circumvent LTV limits, this trend is not prevalent and

 3) The average mortgage-income ratio for private residential properties (based on top income bracket quartile) remains strong at 25% currently and 33% on a normalised interest rate of 3.5%, by our estimates. While there are still supply issues, we believe that the sector is in better financial health than in 2007-08.

 Registration Of Interest

The 7th and most comprehensive round of property cooling measures since 2009 took effect on 12 January 2013 and it adds additional complexity to a layman who intending to buy a property. The following is the summary of the latest cooling measures to help buyers understand their liability and the initial cash outlay requirements in order for them to optimize their investment.

 

Citizenship and Additional Buyer Stamp Duty (ABSD) Relationship

Citizenship and ABSD Relationship

 

Loan To Value Ratio and Minimum Cash Outlay Relationship

LTV and Cash Outlay Relationship

Note: LTV for corporate entities is 20%.

 Registration Of Interest 

Summary Of Seven Rounds Of Government Cooling Measures

14 Sep 2009  

• Interest absorption scheme (IAS) removed  

• Jan 09 Budget assistance measures for property market were not extended  

• GLS programme reinstated 

19 Feb 2010 

• Max permissible loan-to-value (LTV) limit reduced from 90% to 80%  

• Seller’s stamp duty (SSD) levied on sale of private residential property within a year of purchase

30 Aug 2010 

• SSD holding period increased to 3yrs with rates charged on a sliding scale of 3%, 2% & 1%  

• For buyers with Outstanding Loan, min cash down-payment increased from 5% to 10% of valuation limit & LTV reduced from 80% to 70%  

• MOP of non-subsidised HDB flats increased from 3 to 5 years (resale & subletting restriction)

 

14 Jan 2011

 

• SSD holding period increased to 4yrs & rates chargeable changed to 16%, 12%, 8% & 4%

• LTV 60% for 2nd HL

• LTV 50% for companies

8 Dec 2011

 

Additional Buyer’s Stamp Duty (ABSD): 

+ 10% for foreigners

+ 3% for PRs buying 2 nd property

+ 3% for Spore buying 3rd property

 

above existing duty:

1% on the 1st $180K

2% on the next $180K

3% on the remainder.

6 Oct 2012

 

• Max tenure 35 years for purchase. LTV reduced if > 30 yrs or the sum of tenure & age > 65 yrs (LTV 60% if no HL, 40% with ≥1 HL)

• Refinancing tenure 35 yrs less no of years since 1st HL disbursed

• LTV for companies reduced from 50% to 40%

12 Jan 2013

ABSR: PR’s 1st property (5%) & Singaporean’s 2nd property (7%). PR’s 2nd property & Singaporean’s 3rd property at 10%. Foreigners & company at 15%.

LTV: 2nd HL at 50% (30% if tenure > 30 years or loan past age 65). 3rd HL at 40% (20% if tenure > 30 years or loan past age 65). For corporate entities, LTV reduced from 40% to 20%

Min Cash Down Payment: Applying for 1st HL: No change, i.e. 5% & 10% if tenure > 30 years or loan extends past age 65. 2nd & subsequent HL at 25% (increased from 10%)

Mortgage Service Ratio for HDB loan (purchase & refinancing): 30% of borrower’s gross monthly income.

PR HDB flat restriction: Sell flat within 6 months of private property purchase (BUC - 6 months from TOP/SCS) & cannot sublet whole flat

CPF withdrawal restriction for HDB lease < 60 years (previously apply to private property only)

EC construction & sale restrictions

Seller’s stamp duty on industrial properties

 

Progressive Payment Scheme For New Project

Progressive Payment Scheme

 

Registration Of Interest

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