New MAS Rules on taking Equity Loan on existing Properties

[Dennis Ng]

28 Jul 2011

New MAS guidelines for Equity Term Loan for existing properties with effect from 27 Jul 2011.

Eg. Client has one fully paid property and one property with outstanding loan.

If the fully paid property is re-mortgaged for Term Loan, the max quantum is 80%.

If the property with outstanding loan is remortgaged for Term Loan, the max quantum is 60%.

However, if the outstanding loan comprise only Term Loan &/or Overdraft (instead of Housing Loan), then max quantum is 80%.

MAS 632 has been amended as follows:

1) Regulatory LTV Limits on Mortgage Equity Withdrawal Loans (“MWL”), ie Cashout Or Additional Term Loan

Where the Borrower is an Individual or a vehicle set up by any Individual solely to invest in Residential Property, the maximum LTV on the Residential Property, together with the outstanding balance of any credit facilities secured on that property will be subject to an LTV limit of:

(i) 80%, if the Borrower has no outstanding housing loan (whether from HDB or a financial institution regulated by MAS); or



(ii) 60%, if the Borrower has one or more outstanding housing loans (whether from HDB or a financial institution regulated by MAS).

The above amendments will take effect on 27 Jul 2011 for all new loan applications.

[ngtfook]

Hi Dennis,

If the fully paid property is re-mortgaged for Term Loan, the max quantum is 80%.

If the property is fully paid with CPF only, can one obtain re-mortgate loan? or it must be fully paid with cash.

[Dennis Ng]

Hi Dennis,

If the fully paid property is re-mortgaged for Term Loan, the max quantum is 80%.

If the property is fully paid with CPF only, can one obtain re-mortgate loan? or it must be fully paid with cash.

Can.

But max loan = 80% x Current Market Valuation (deduct CPF utilised), so the loan amount will be very much lower. If use Cash, max loan = 80% x Valuation.

[sharelvrs]

Hi Dennis,
Do you think it is advisable to take up a equity term loan now from my current condo and awaiting for the right time to use it to purchase another property when the prce drop?

[Dennis Ng]

Hi Dennis,
Do you think it is advisable to take up a equity term loan now from my current condo and awaiting for the right time to use it to purchase another property when the prce drop?

yes, I think so.

[Starfire]

Hi Dennis,
Do you think it is advisable to take up a equity term loan now from my current condo and awaiting for the right time to use it to purchase another property when the prce drop?

yes, I think so.

Hi Dennis,
(1) Can i take up or apply a equity term loan today and only use it to buy the property in 2013 ?

(2) When will the bank start charging me interest ? what kind of interest rate will they based on ?

[Dennis Ng]

Hi Dennis,
Do you think it is advisable to take up a equity term loan now from my current condo and awaiting for the right time to use it to purchase another property when the prce drop?

yes, I think so.

Hi Dennis,
(1) Can i take up or apply a equity term loan today and only use it to buy the property in 2013 ?

(2) When will the bank start charging me interest ? what kind of interest rate will they based on ?

Hi Starfire,
the latest time for you to disburse the loan is 6 months from loan offer. So the loan will start charging interest from then on, and the loan amount will reduce as per monthly payment.

Interest rate charged depends on the package, if it's fixed rate for 3 years, the rate if fixed for first 3 years of loan. If interest rate is pegged to SIBOR + margin, then it depends on the SIBOR then.

Anyway, I think the next Crisis is likely to hit us in year 2012, and even if it is year 2013, your downside is ONLY pay 2 years of interest (which may be 1% per year to say, 3% per year or 6% in total)...your upside will be minimum 50% to 100% since buying during Crash it is easy to make 50% to 100% gains.

Thus, it is certainly something worthwhile to do.

[limkokkim]

yes, I think so.

Hi Dennis,
(1) Can i take up or apply a equity term loan today and only use it to buy the property in 2013 ?

(2) When will the bank start charging me interest ? what kind of interest rate will they based on ?

Hi Starfire,
the latest time for you to disburse the loan is 6 months from loan offer. So the loan will start charging interest from then on, and the loan amount will reduce as per monthly payment.

Interest rate charged depends on the package, if it's fixed rate for 3 years, the rate if fixed for first 3 years of loan. If interest rate is pegged to SIBOR + margin, then it depends on the SIBOR then.

Anyway, I think the next Crisis is likely to hit us in year 2012, and even if it is year 2013, your downside is ONLY pay 2 years of interest (which may be 1% per year to say, 3% per year or 6% in total)...your upside will be minimum 50% to 100% since buying during Crash it is easy to make 50% to 100% gains.

Thus, it is certainly something worthwhile to do.

Dear Dennis,

May I clarify that in your previous post, you mentioned that the drop in property may just be 10%-30% as our land is limited and we have real demand for housing so property may not drop that much?

thanks
GL

[Dennis Ng]

Dear Dennis,

May I clarify that in your previous post, you mentioned that the drop in property may just be 10%-30% as our land is limited and we have real demand for housing so property may not drop that much?

thanks
GL

Hi limkokkim,
yes, this is my opinion, as the next Crisis is likely to be coupled with rising inflation, so inflation is positive for Real Assets such as Property.

Please note that I do NOT have a crystal ball and I might be wrong. But there is huge over-supply of HDB flats and condos coming on stream in year 2013 and year 2014.

[Starfire]

Hi Dennis,
(1) Can i take up or apply a equity term loan today and only use it to buy the property in 2013 ?

(2) When will the bank start charging me interest ? what kind of interest rate will they based on ?

Thanks Dennis for the info. By the way, today OCBC inform us that they not longer offer SOR.
Hi Starfire,
the latest time for you to disburse the loan is 6 months from loan offer. So the loan will start charging interest from then on, and the loan amount will reduce as per monthly payment.

Interest rate charged depends on the package, if it's fixed rate for 3 years, the rate if fixed for first 3 years of loan. If interest rate is pegged to SIBOR + margin, then it depends on the SIBOR then.

Anyway, I think the next Crisis is likely to hit us in year 2012, and even if it is year 2013, your downside is ONLY pay 2 years of interest (which may be 1% per year to say, 3% per year or 6% in total)...your upside will be minimum 50% to 100% since buying during Crash it is easy to make 50% to 100% gains.

Thus, it is certainly something worthwhile to do.

Dear Dennis,

May I clarify that in your previous post, you mentioned that the drop in property may just be 10%-30% as our land is limited and we have real demand for housing so property may not drop that much?

thanks
GL

[prospered]

Hi Dennis,
I'm married, stay in hdb, and about to refinance my home loan in a month's time. Understand that under current ruling, if there is outstanding loan, my next loan is capped at 60%. Just wondering, during the refinancing, can I take up the loan solely under my name only? This would allow us to take up to 80% of another loan for private property purchase under my wife's name (where technically she is without outstanding loan). Thanks

[Dennis Ng]

Hi Dennis,
I'm married, stay in hdb, and about to refinance my home loan in a month's time. Understand that under current ruling, if there is outstanding loan, my next loan is capped at 60%. Just wondering, during the refinancing, can I take up the loan solely under my name only? This would allow us to take up to 80% of another loan for private property purchase under my wife's name (where technically she is without outstanding loan). Thanks

Hi prospered,
if you currently own the house jointly with your wife and currently both of you are borrowers, it is not a simple case of deciding to change to single borrower, the new bank might/might not agree to it.

Suggest you email us at info@HousingLoanSG.com or call us at 6737 8801 so that one of my staff can assist you further.