Allowing property owners to take advantage of current low interest rates

SINGAPORE – Existing home owners looking to refinance their home loans will enjoy more flexibility with relation to the Total Debt Servicing Ratio (TDSR), the Monetary Authority of Singapore said on Thursday.

The move will allow property owners to take advantage of current low interest rates even if refinancing would mean busting the TDSR limit of 60 per cent.

The Mortgage Servicing Ratio limit will also not be applied to refinancing of housing loans for Housing and Development Board flats and Executive Condominiums that are owner-occupied. Upcoming executive condo launches include Yio Chu Kang EC, Inz Residence EC, Choa Chu Kang EC, Anchorvale Lane EC,  while existing ones include The Terrace EC, Brownstone EC, The Vales EC, Parc Life EC , Sol Acres EC, The Visionaire, Bellewoods EC, Signature at Yishun, The Criterion EC and Northwave EC.

About 2.5 per cent of new home loans are currently above the TDSR threshold.

Previously, this exemption was granted only to the refinancing of loans for properties bought before the introduction of the TDSR framework in June 2013.

Now the exemption applies to all owner-occupied housing loans.

Under previous rules, investment property loans could be refinanced above the 60 per cent TDSR threshold if the borrower committed to a debt reduction plan and applied for the refinancing before 30 June 2017.

Now the MAS has specified that to benefit from the TDSR exemption, the debt reduction plan should involve the borrower committing to repay at least 3 per cent of the loan’s total outstanding balance over three years.

The TDSR rules will still apply to new housing loans and the MAS notes that this move does not represent a relaxation of property cooling measures.

One party the new rules would help are those who have bought after the TDSR was introduced and wish to refinance; however they may recently have become unemployed, have lower income compared to when they first bought the property, or chalked up additional liabilities since and cannot refinance below the 60 per cent TDSR threshold, said Mr David Baey Ee-Qiang, the head of mortgage at personal finance comparison portal MoneySmart.sg.

This is because the TDSR threshold now does not apply for refinancing regardless of when the property was purchased.

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