It has been 3 years since the Total Debt Servicing Ratio (TDSR) framework was introduced by Singapore’s Monetary Authority (MAS) to slow the rapid rise in property prices in Singapore. It has not only achieved it’s aim it has, together with other measures, also caused a gradual decline in prices to the tune of 10% since its introduction.
Within the last 3 years interest rates have also declined. This has prevented homebuyers who bought properties after TDSR was introduced to not be able to refinance if their income level has dropped.
Recognising this, MAS announced recently that the TDSR framwork will be tweaked to enable borrowers to better manage their existing debts.
Under the new rules which took effect in September 2016, borrowers who bought properties for their own stay after the introduction of the TDSR on 28 June 2013 will no longer be limited by the TDSR threshold of 60 percent or Mortgage Servicing Ratio (MSR) limit of 30 percent at the time of refinancing. Without this change only owner-occupied properties bought before the implementation of the TDSR were exempted from the TDSR ruling.
With this change borrowers can now refinance their investment property loans above the TDSR threshold, regardless of when the properties were purchased, but two conditions must be met:
1) Borrowers must commit to a debt reduction plan with their financial institution to repay at least three percent of the outstanding balance over a period of not more than three years; and
2) Fulfill the financial institution’s credit assessment.
This will definitely benefit home owners who recently lost their job in this weak economic environment or had a change in their employment status resulting in reduced income.
Full statement from MAS here.