A tweak in time

/ The Edge Property
September 9, 2016 9:00 AM SGT
On Sept 1, the Monetary Authority of Singapore refined the rules under the total debt servicing ratio framework for the refinancing of properties. This was done “in response to feedback from some borrowers who were unable to refinance their existing property loans, owing to the application of the TDSR threshold of 60%”, according to MAS in its statement.
Previously, only owner-occupied properties bought before June 29, 2013 were exempted from the TDSR loan framework. Now, that exemption has been extended to the refinancing of all owner-occupied properties purchased before or after TDSR was introduced.
Prior to Sept 1, owners of properties purchased for investment could refinance their loans above the TDSR threshold of 60% only if they committed to debt restructuring plans. They were also given a deadline of June 30, 2017 to pare their debt to the TDSR limit of 60%, failing which they would be given no more exemptions for refinancing.
With effect from Sept 1, the TDSR threshold has also been relaxed for property investors, regardless of when the property was purchased. They have to meet two conditions, however: to commit to a debt reduction plan and repay at least 3% of the outstanding balance over a period of three years. They also have to fulfil the financial institution’s credit assessment.
Relief for property investors
Eugene Huang, director and founder of Redbrick Mortgage Advisory, says: “The relaxation of the TDSR cap of 60% for refinancing will really help property investors, as they will now be able to refinance their properties at a lower interest rate.”
It is a relief for some older property investors who had feared having to offload their properties at less-than-ideal prices, as the previous requirement was that, if their debt level was not within the TDSR limit of 60% after June 2017, they would not be able to refinance. And when the higher interest rates kick in, and their rents are unable to help cover the monthly instalments, they would be forced to sell, adds Huang. Now, they no longer have the June 2017 deadline looming ominously.
MAS emphasises that the recent move does not represent a relaxation of property market cooling measures. “The TDSR is a structural measure to encourage prudent borrowing by households,” says Ong Chong Tee, MAS deputy managing director, in a statement.
Desmond Sim, head of CBRE Research for Singapore and Southeast Asia, says: “MAS is being proactive...