MAS Clarifies Loan-to-Value and Total Debt Servicing Ratio Rules for Residential Mortgages and Mortgage Equity Withdrawal Loans

Singapore, 7 April 2020...  The Monetary Authority of Singapore

In response to public and media queries, the Monetary Authority of Singapore (MAS) has clarified the application of the loan-to-value (LTV) limits and total debt servicing ratio (TDSR) for residential mortgages and mortgage equity withdrawal loans (MWLs). This will help individuals and businesses explore options to meet their cash flow needs.

For Individuals (including Sole Proprietors)

2   The TDSR will not apply to:

• deferment of mortgage repayments (for residential, commercial, or industrial properties);

• refinancing of owner-occupied residential mortgages;

• mortgage equity withdrawal loans if the LTV ratio does not exceed 50%; and

• unsecured credit facilities such as credit cards and personal loans.

3   Borrowers are not subject to TDSR when they apply to defer either their principal payment or both principal and interest payments for their residential mortgages.  This relief, announced by MAS on 31 March 2020 as part of an industry-wide package, applies to residential property purchase 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.

4   Most major retail banks have extended payment deferments to individuals with commercial or industrial property loans as well. As in the case of residential mortgages, these borrowers are not subject to TDSR when they defer their repayments. They can approach their lenders to seek assistance and explore possible relief measures.

5   Borrowers are not subject to TDSR and LTV limits when they refinance their loans for owner-occupied residential properties.  This will help borrowers with fixed rate mortgage packages that are out of the lock-in period who want to refinance their loans to obtain a lower interest rate.

6   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%. This adjustment was introduced in March 2017 and is intended to help individuals monetise equity in properties that they already own.

7   Borrowers are not subject to TDSR requirements when they take up 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. In this regard, we urge individuals to exercise prudence when tapping into credit lines.

For Business Owners and SMEs

8   SME borrowers [1] are not subject to TDSR when they apply for payment deferments on their secured property loans.  This payment deferment relief was announced by MAS on 31 March as part of the financial industry’s relief package for SMEs.

9   Businesses [2] that take up MWLs secured on residential or non-residential properties are not subject to TDSR and LTV limits. This is provided under MAS’ current rules to facilitate the provision of credit to businesses, some of which may rely on MWLs to finance their operations.