In our previous post, we discussed what Total Debt Servicing Ratio is and how it impacts you. In this post, we touch on how existing home owners may be able to seek exemption from the Total Debt Servicing Ratio requirement
In 2013, after the introduction of the TDSR requirements, Monetary Authority of Singapore (“MAS”) started receiving significant feedback from existing borrowers who struggled to refinance their loans. At that point in time, many in the market had already committed to home purchases and mortgages that were well above the 60% limit.
In February 2014, MAS announced that it would exempt residential property loan borrowers from the 60% TDSR limit so long as:
• They can show that they purchased the property before 29 June 2013
• They are the owner-occupier of the property
Unlike previous cases, they also do not need to show that they do not own any other property or have any other outstanding property loan
However, the above exemptions only apply to owner-occupied property. For property purchased for investment reasons, the TDSR limit will remain at 60%. For those affected, MAS has instead granted a concession by permitting them to refinance in excess of the 60% TDSR threshold, if they fulfil the following criteria:
• Property was purchased prior to 29 June 2013
• Borrower satisfies bank’s credit assessment criteria
• Commit to a debt reduction plan at point of refinancing
• Date of application must be before 30 June 2017
These changes would help ease the debt burden of owners of residential private property and mitigate risk of forced sales in Singapore. Based on DREA’s insights, we also note that SIBOR rates are expected to gradually increase in the near term and with the application deadline approaching, it may be a good time to begin considering refinancing options
For more information on SIBOR rates visit: DREA 3-mth Forward SIBOR rates
For more information on TDSR, check out our previous post What is TDSR?