MAS waives TDSR limits for borrowers seeking to defer mortgage repayments

SINGAPORE – Singapore’s central bank has clarified that some of the limits used to calculate the amount an individual can borrow to repay housing and consumer loans will not apply to deferred repayment measures announced last week.

The Monetary Authority of Singapore (MAS) said on Tuesday (April 7) that for individuals, including sole proprietors, the total debt servicing ratio (TDSR) will not apply to deferment of mortgage repayments for residential, commercial, or industrial properties, refinancing of owner-occupied residential mortgages, and unsecured credit facilities such as credit cards and personal loans.

The TDSR will also not apply to mortgage equity withdrawal loans (MWLs) if the loan-to-value (LTV) ratio does not exceed 50 per cent.

TDSR caps the amount buyers can borrow for a property loan. Typically, borrowers’ monthly repayment for all debts must not exceed 60 per cent of their monthly income. This includes mortgages, credit card bills, car loans and personal loans. LTV refers to the loan amount as a percentage of the property’s value.

MAS said borrowers are not subject to TDSR when they apply to defer either their principal payment or both principal and interest payments for their home loans. Interest will accrue only on the deferred principal amount.

This relief applies to home loans and MWLs, including those under debt reduction plans, and extends to both owner-occupied (HDB and private) and investment properties. Interest will accrue only on the deferred principal amount.

The loan deferment measures were announced by MAS last week as part of an industry-wide package aimed at heading off a wave of delinquencies and bankruptcies amid the coronavirus-induced economic downturn.

MAS said its clarfication on Tuesday was in response to queries from the public and media on its guidelines for deferment of secured loans and mortgage payments, and will help individuals and businesses explore options to meet their cash flow needs.

In Tuesday’s statement, MAS said that payment deferments to individuals with commercial or industrial property loans are also not subject to TDSR.

The TDSR and LTV limits relief for loan refinancing of owner-occupied residential properties will help borrowers with fixed rate mortgage packages that are out of the lock-in period, MAS said.

It also clarified that borrowers who take up MWLs secured on their existing private residential or non-residential properties are not subject to TDSR if the LTV ratio does not exceed 50 per cent since March 2017.

The TDSR requirements will also not apply to unsecured credit facilities, such as personal loans and credit cards.

However, there are minimum income requirements for such facilities, and MAS has also put in place measures such as the industry-wide borrowing limit to promote financial prudence and avoid the excessive accumulation of debt that would lead to future financial strain.

MAS also clarified that small and medium enterprises (SMEs) are not subject to TDSR if they qualify for payment deferments on their secured property loans as part of the financial industry’s relief package for SMEs announced last week.

To facilitate the provision of credit to businesses, MAS’ current rules allow them to take up MWLs secured on residential or non-residential properties without being subject to TDSR and LTV limits.

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