MAS has just announced the introduction of a debt servicing ratio framework, with effect from tomorrow, 29 June 2013.
Whilst the cap of 60% on debt servicing ratios (monthly debt obligations versus monthly income) is not something drastically different from banks’ current practices, my focus would be the impact of the following restrictions:-
- borrowers named on a property loan must now also be mortgagors (ie. co-owners) of the residential property for which the loan is taken;
- “guarantors” who are standing guarantee for borrowers otherwise assessed by the bank at the point of application for the housing loan not to meet the TDSR threshold for a property loan are to be brought in as co-borrowers (and therefore, must also become co-owners); and
- in the case of joint borrowers, that banks use the income-weighted average age of borrowers (based on borrowers’ gross monthly income) when applying the rules on loan tenure (i.e. lower LTV-ceilings for loan tenures exceeding 30 years or extending past a borrower’s 65th birthday ). Continue reading “Hot off the Press: MAS Introduces Debt Servicing Framework for Property Loans”