The lowdown on property loan regulations
There are two key regulations governing property loans to ensure a sustainable property market and to safeguard home buyers from overcommitting to a property purchase.
The first one, MAS Notice 632, applies to borrowers purchasing a residential property located in Singapore.
The second one, MAS Notice 645, applies to an individual or an entity set-up for the purchase of properties located in Singapore or Overseas.
|MAS Notice 632
Residential Property Loan
|MAS Notice 645
Guidelines on Total Debt Servicing Ratio (TDSR)
MAS Notice 632 includes regulations relating to the:
It provides guidelines on calculating the Total Debt Servicing Ratio (TDSR), and Mortgage Servicing Ratio (MSR) whereby
MAS Notice 632 on residential property loan
This applies to any loan secured against a residential property in Singapore, whether for:
To secure a loan against a residential property, the applicant must be the property owner, i.e. the borrower must be a mortgagor.
When banks calculate the loan amount they will look at the property’s current market value, and the purchase price. The Loan-To-Value or LTV is the ratio of the loan amount against the lower of the purchase price or the current market value. The purchase price will be adjusted to deduct any discounts, rebates, or benefits included in the purchase of the property or in obtaining a home loan.
Here’s a diagram showing the maximum LTV, and the minimum cash required (own cash, not from CPF) to purchase a private or HDB property.
LTV, Tenure & Min Cash Down payment for property purchase^ If more than 1 housing loan, LTV would be reduced, similar to non-HDB flats
MAS Notice 645 and guidelines on TDSR for property loans
This applies to properties located in Singapore or overseas, and includes residential, commercial or industrial property loans, land and construction loans.
Your total monthly expenditure, including the payment of the loan you’re applying for, must not exceed 55% of your gross monthly income. The figure used for your expenditure must include other property loans, car loans, credit card payments, and part of any other debt you’re a guarantor. The TDSR is calculated using the following equation.
If you’re purchasing a HDB flat (new/resale) or purchasing an EC within the Minimum Occupation Period, your total monthly property-related expenditure, including the payment of the loan you’re applying for, must also not exceed 30% of your total gross monthly income. This is referred to as the Mortgage Servicing Ratio (MSR). The MSR is calculated using the following equation.
Here is a diagram showing what is taken into account as income and debt for TDSR.
Breakdown of debt components for TDSR:
Breakdown of income components for TDSR:
Monthly instalment of an existing property you are selling can be excluded from TDSR if you provide the required documents:
Here is a diagram showing what is taken into account as income and debt for MSR.
Breakdown of debt components for MSR:
Breakdown of income components for MSR:
Monthly instalment of an existing HDB or EC within MOP can be excluded from MSR if you provide a copy of your signed undertaking to HDB committing to complete the sale of your existing property and provide a written declaration that you will sell your existing property in accordance to the signed undertaking to HDB.
This guide is for general information only. This summarises the key requirements and regulations applicable to property loans. The requirements and regulations are subject to changes from time to time.
Article was originally published on 14 December 2017.
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