MAS EASES TDSR
RESTRICTIONS
Feb 11, 2014
1. The Monetary Authority of Singapore (MAS) has received feedback from borrowers who face challenges refinancing loans for owner-occupied properties which were bought before the introduction of the Total Debt Servicing Ratio (TDSR) rules. MAS has decided to broaden the existing exemption from the TDSR threshold of 60 percent for such loans to ease the debt servicing burden of these borrowers.
Refinancing of owner-occupied property loans
(c) the borrower fulfills the FI’s credit assessment.
Info courtesy - http://tinyurl.com/q7type6
Feb 11, 2014
The Monetary Authority of Singapore (MAS) on Monday eased
the restrictive Total Debt Servicing Ratio (TDSR) on certain property buyers.
Below is the full statement from MAS: 1. The Monetary Authority of Singapore (MAS) has received feedback from borrowers who face challenges refinancing loans for owner-occupied properties which were bought before the introduction of the Total Debt Servicing Ratio (TDSR) rules. MAS has decided to broaden the existing exemption from the TDSR threshold of 60 percent for such loans to ease the debt servicing burden of these borrowers.
Refinancing of owner-occupied property loans
2. Under the revised rules, a borrower who bought a
residential property before the TDSR rules were introduced – i.e. the Option to
Purchase (OTP) of the residential property was granted before 29 June 2013 –
will be exempted from the TDSR threshold as long as he occupies the residential
property that is being refinanced. This is a concession compared to the current
rules, which also require that he does not own any other property, or have any
other outstanding property loan.
3. The Mortgage Servicing Ratio (MSR) will also not apply to
the refinancing of loans for HDB flats and Executive Condominiums (ECs) that
are owner-occupied and were purchased before their respective MSR
implementation dates.
4. A similar concession will apply with regard to loan
tenures, for residential properties purchased before the respective
implementation dates for the loan tenure limits. In such cases, borrowers whose
loan tenures for their owner-occupied residential properties exceed the current
regulatory limits will be allowed to maintain the remaining tenures of their
loans at the point of refinancing.
Refinancing of investment property loans
5. The TDSR threshold of 60 percent will continue to apply
to the refinancing of all investment property loans. This is to encourage
borrowers to right-size their loans and thereby reduce their vulnerability to
adverse economic conditions or changes in interest rates. However, MAS
recognizes that some borrowers may face challenges in right-sizing their debt
obligations in the short term; the starting level of debt may be too high and
there may be significant costs involved if they had to sell their properties to
reduce their leverage.
6. Therefore, MAS will allow a transition period until 30
June 2017, during which a borrower may refinance his investment property loans
above the 60 percent threshold, provided he meets the following conditions:
(a) the OTP of the property was granted before 29 June 2013;
(b) the borrower commits to a debt reduction plan with the
financial institution (FI) at the point of refinancing; and (c) the borrower fulfills the FI’s credit assessment.
7. The changes are intended to help borrowers ease their
immediate debt servicing burdens, while encouraging those who have taken on
high leverage on their investment properties to right-size their loans as early
as possible.
8. Borrowers should be aware that the current low interest
rate environment will not persist indefinitely. When interest rates rise,
borrowers will face higher mortgage repayments. Borrowers engaging in
refinancing should therefore exercise prudence and review their debt
commitments.
9. The revised rules will take immediate effect.