The TDSR Framework And Refinancing Regulations In Singapore


MAS, Singapore's monetary authority, says anyone seeking to refinance a loan before the TDSR rule is exempt from the 60% threshold of the TDSR. TDSR stands for Total Debt Service Ratio. As long as the property you are considering refinancing concerns a residential property, this exemption applies. However, you must take another rule to consider. In order to qualify for the exemption, the OTP or the option to purchase must be granted before June 29, 2013. This regulation applies to all financial institutions offering mortgages, the TDSR taking into account the full debt of the borrower when calculating the loan amount. The instruction is to respect a TDSR of 60% for all mortgages.

Challenges faced by borrowers

The TDSR was set up to ease the debt service burden of borrowers. However, the Mortgage Management Ratio does not apply to HDB apartments and condominiums that refinance homes already purchased and occupied prior to the implementation date. The transition period is expected to last until June 30, 2017. This means that MAS will authorize the borrower to refinance or invest in home loans exceeding the 60% threshold only if he accepts a plan. debt reduction. The borrower must also satisfy the credit assessment of the financial institution as well as credits granted before June 29, 2013.

Why a TDSR of 60%?

After reviewing the portfolios of the financial institution in 2012, MAS discovered that there were unwise practices in calculating debt service ratios. This has been highlighted as one of the areas to improve in terms of underwriting mortgage applications. They asked the financial institution to include the other debts of the borrower, which gives a more accurate idea of ​​the percentage of total monthly debt compared to gross monthly income. The other factors taken into account in the calculation of the TDSR are the monthly repayment of the mortgage and the monthly repayment of other outstanding debts and non-real estate debts. In addition, the financial institution must apply an additional 30%, in addition to 60%, to all variable and rental income. This would help evaluate the debt servicing capacity of the borrower.

The refinement of the rule greatly affects the naming of borrowers. The names of the borrowers on the property and the demand of the mortgagors should match the TDSR. In the case of joint borrowers, the average age of the borrowers and their income must be taken into account when calculating the duration or duration of the loan authorized. The LTV and TDSR limits are of a structural nature. This means that these rules will be in place for a long time in the hope of encouraging prudent borrowing.

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