The year 2013 saw a lot of new regulations regarding real estate and mortgages, however, not many of them applied to refinancing. To help you grasp that concept better, below is a table presenting the new measures regarding refinancing that were introduced from 2012 onward.
Table 1: Refinancing Regulations
|With Effect From||Rules|
|6 Oct 2012||The maximum tenure of all residential property loans for individual and non-individual 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.|
|28 Aug 2013||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.|
|10 Dec 2013||Executive Condominium (EC) loans by FIs: A MSR cap of 30% for refinancing within the minimum occupation period of 5 years.|
Do keep in mind that refinancing isn’t offered for the HDB Concessionary Loan. Simply put, if you are buying an HDB flat with a mortgage financed by a private money lender, you aren’t eligible to apply for refinancing for the HDB Concessionary Loan.
Vague Terms About Loan Tenures When it Comes to Refinancing
In refinancing, it’s usually unclear whether the specified tenure would encompass the years that were already expended in the earlier loan, and whether or not this will have any bearing on determining the maximum tenure of the new loan, particularly if the total number of years is well within the tenure limit.
Since October 6, 2012, the Monetary Authority of Singapore enforced a limit on the tenure of all housing loans, which is 35 years from the time the loan was disbursed. In response to this new regulation, a number of banks subtracted the number of years spent in the previous mortgage from the maximum tenure of the new mortgage.
Let’s this take for example: A certain Mr. A took a mortgage in the year 2007, and it was disbursed that same year. In November of 2012 (after the MAS enforced the new tenure), Mr. A opts for refinancing. By then, he had already spent 5 years financing his first loan.
Given that there is now a 35-year limit on loan tenures, Mr. A should have only 30 years to go, as he has already spent 5 years on the original loan.
But here’s where it gets tricky: What about in cases when the borrower is qualified for a maximum loan tenure of 20 years, based on the bank’s evaluation of his financial profile? In Mr. A’s case, his bank or financing company would consider the first five years spent on the original loan. As he is qualified for a 20-year tenure, his refinanced loan now has only 15 years remaining.
If you think about it, the bank’s 20-year tenure, even when added to Mr. A’s first five years with the original loan, is way below the 35-year limit imposed by the MAS. Luckily, cases like this one aren’t that widespread.
All these mortgage regulations can be a bit baffling for home buyers, so you may have some questions about them. If you’re considering taking a housing loan in Singapore, it would definitely be advantageous for you to have a professional explain the basics to you. All you need to do is contact an iCompareLoan mortgage expert – their services valuable, and are absolutely free.
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