Mortgage Rule Changes And Refinancing

2013 is the year with the most number of property rules and
home mortgage regulations being rolled out.
However, not all the crop of measures apply to refinancing
facilities.


The Home Mortgage Rules Introduced Since 2012, That Apply To
Refinancing
With Effect From
6 Oct 2012

Rules
The maximum tenure of all residential property loans for individual and nonindividual borrowers will be capped at 35 years.
The sum of the tenure of the re-financing facility and the number of years since the
first housing loan granted to the borrower for the purchase of that residence was
first disbursed, cannot exceed 35 years.

12 Jan 2013

HDB loans by FIs: A Mortgage Servicing Ratio (MSR), or percentage of total monthly
mortgage obligations to gross monthly income, not exceeding 30% will apply.

29 Jun 2013

A Total Debt Servicing Ratio (TDSR), or percentage of total monthly debt obligations
to gross monthly income, not exceeding 60%, will apply to all property loans granted
by FIs to individuals.
A mandatory interest rate of 3.5% (4.5%) p.a. or the prevailing market interest rate,
whichever is higher, has to be used in the computation of MSR and TDSR for
residential (non-residential) loans.

With Effect
From
28 Aug 2013

10 Dec 2013

Rules
HDB loans by FIs: The maximum loan tenure is reduced
to 30 years.

The sum of the tenure of the re-financing facility and
the number of years since the first housing loan granted
to the borrower for the purchase of that HDB flat was
first disbursed, cannot exceed 30 years.
Executive Condominium (EC) loans by FIs: A MSR cap of
30% for refinancing within the minimum occupation
period of 5 years.

Note that the HDB Concessionary Rate Loan is not available
for refinancing.
In other words, if a borrower has taken a loan by a FI to
purchase a HDB flat he cannot refinance to the HDB
Concessionary Rate Loan.


Ambiguity In Loan Tenure
A grey area in imposing a tenure cap on re-financing facilities
is whether the number of years already spent servicing the
previous loan will be taken into account when deciding on the
maximum tenure of the new loan, if the sum of the loan
duration for the new loan and the years already spent does
not exceed the cap.


For Example
after the imposition of the 35-year loan cap in 6 October
2012, a handful of banks deduct the number of years used in
financing the previous loan from the maximum duration
allowed for the new loan.


An Example
1st Loan: Taken in 2008
In December 2012, the borrower decides to refinance.
Number of Years Already Used In Financing 1st Loan = 4
As the sum of the tenure of the re-financing facility and the
number of years since the first housing loan granted to the
borrower for the purchase of that residence was first
disbursed, cannot exceed 35 years:


An Example
Technically Maximum Years Allowed For Refinancing = 35-4 =
31
However a handful of oddball banks take into consideration
the 4 years already spent, so if the borrower is qualified for a
maximum tenure of 20 years based on the bank's assessment
of his financial profile, the duration for the refinanced loan
will be slashed into 16 years.


In reality the sum of the 4 years already spent and the 20-year
duration of the refinanced loan only adds up to 24 years,
which is below the 35 years cap, and in compliance with MAS
rule of the sum not exceeding 35 years.


iCompareLoan
Thankfully, such cases are on the decline.
If you are in need of more explanation about the ABCs of the
string of mortgage rules to decide on a suitable Singapore
home loan, turn to the free service of an iCompareLoan
mortgage expert today!


About Property Buyer Mortgage Consultants
Property Buyer Mortgage Consultants is a research focused independent mortgage broker. We
emphasize a consultative approach where we match our client’s financial situation with the best
fit mortgage loan, not simply a cheap loan.
We also help property buyers in their buying process helping them avoid pitfalls from
unscrupulous property agents. (We are not property agents, therefore there is no conflict of
interests.)
We also developed our proprietary home loan reporting tool which provides amongst other
things, 23 years Sibor history as well as 6 years worth of SOR.
Our service is free to you as banks pay us a commission on loan deals completed. Banks in turn
save on staffing cost as we are not on their payroll.
www.PropertyBuyer.com.sg/mortgage
www.SingaporeHomeLoan.net
www.iCompareLoan.com/consultant/

Mortgage Rule Changes And Refinancing

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Mortgage Rule Changes And Refinancing