Helping borrowers to refinance existing property loans

SINGAPORE: The Monetary Authority of Singapore (MAS) said on Thursday  that it is fine-tuning the refinancing rules under the Total Debt Servicing Ratio (TDSR) framework to allow borrowers more flexibility in managing their debt obligations.

The move was in response to feedback from some borrowers who are unable to refinance existing property loans owing to the application of the 60 per cent TDSR threshold, MAS said. Under current rules, the exemption only applied to borrowers refinancing on loans for properties bought before the introduction of TDSR.

For owner-occupied residential properties, the central bank will extend the exemption from the TDSR framework when refinancing to include owner-occupied residential properties bought after the introduction of TDSR.

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. Recent executive condo launches include Treasure Crest and Northwave EC while existing ones include The Terrace EC, Brownstone EC, The Visionaire EC, Parc Life EC , Waterwoods EC, Signature at Yishun, Skypark Residences, Wandervale EC, The Vales EC, The Criterion EC, The Amore EC,  Bellewaters EC, Bellewoods EC.

Meanwhile, for refinancing of investment property loans, MAS will now allow a borrower to refinance his investment property loan above the TDSR threshold regardless of when the property purchase is made if he meets two conditions:

a) commits to a debt plan with his financial institution to repay at least 3 per cent of the outstanding balance over a period of not more than three years; and

b) fulfils his financial institutions’ credit assessment

Before this adjustment, refinancing for investment property loans above the TDSR threshold of 60 per cent applied only to properties purchased for investment before the introduction of TDSR.

The revised rules will take immediate effect. In a statement, MAS said the adjustment was not an easing of the cooling measures.

MAS deputy managing director Ong Chong Tee said: “The TDSR is a structural measure to encourage prudent borrowing by households. The adjustment announced today will help borrowers to refinance their existing property loans at lower interest rates and better manage their debt obligations over time. They do not apply to loans for new property purchase and are not an easing of property cooling measures.”

One analyst said the fine-tuning of TDSR rules is likely a targeted approach to help those on the fringe who are facing difficulties in refinancing.

Mr Ku Swee Yong, CEO of International Property Advisor, said: “Today’s adjustment of the policy to fine-tune it is probably to assist the stretched buyers or the people whose income and financing have been adjusted to ease off this group of investors’ worries.

“I do not think this will have any impact in terms of cooling down the property market. The Government would likely still want property prices to trend down a little bit more before they adjust the cooling measures.”

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