The Monetary Authority of Singapore (MAS) stated on Sept 1 that fine-tuning the Total Debt Servicing Ratio (TDSR) refinancing rules for borrowers to make it easier in managing their debts obligations.
Following are things you must know
1. What is the Total Debt Servicing Ratio (TDSR)?
The Total Debt Servicing Ratio (TDSR) limits the quantum of home loan by securing all your monthly debt payments, such as mortgage, personal loans, car loans, credit cards, and so on, not to exceed 60% of the monthly income.
2. How does the TDSR affect you?
The changes in TDSR affect 2 groups of people. The people with existing loan on an investment property, and those with an existing loan on property where they live in.
For the first group, the borrower's investment property loans is allowed to be refinanced above the TDSR threshold regardless the purchased date of the property.
For the second group, a home owner who wants the mortgage of house they live in to be refinance will now be exempt from the 60% rule of TDSR, regardless of when the property being purchased.
3. How many people can benefit from the changes?
Only a small minority of borrowers or about 2.5% of home loans made since the rules of TDSR were implemented are now more than the 60% threshold.
4. Difference of previous and current TDSR rules.
Previously, if the property had been purchased before 29 June 2013, owner-occupied home loans were exempted to the rules.
Loans on investment property were granted to be refinanced more than 60% TDSR threshold, if the borrower applied by 30 June 2017. This deadline has already been removed in the rules.
5. Why did the Monetary Authority of Singapore (MAS) decide to make these Fine-tune?
According to MAS, it had earned feedback from some borrowers who asked to refinance the loans of their home to take advantage the low interest rates were incapable to do so due to the TDSR threshold.
Now, borrowers can move on and refinance, then pay lower monthly installments.