The Monetary Authority of Singapore has a new rule about residential property loans. It was announced last June 28, 2013. The MAS Notice 632 implemented the new rule along with the Notice 645 guideline on its computation with regards to its total debt servicing ratio.
What is MAS Notice 632?
MAS Notice 632 strictly stated that all guarantors of the housing credit applications as well as those taken that were secured by a residential property should be borrowers. The person who is said to pay a part of the installment that he guarantees to pay upon default of the borrower should be made as co-borrower and not just a mere guarantor. This law applies to all guarantors of housing mortgage credit applications with the option to purchase made on or after the 29th of June 2013. This also applies to all refinancing and equity credit applications for housing applied on or after the same date as stated.
Effects on borrowers and guarantors
The amendment prevents people from acting as guarantors without full knowledge of the role and implications of being a housing mortgage guarantor. This means that when they become as co-borrowers, they should be checking the monthly payments of the borrowings they were involved. This also prevents a borrower and a guarantor from obtaining more than one mortgage package, which is possible if he acts as a borrower and then acts only as a guarantor before the amendment. The borrowers are now considered or should be considered as mortgagor. This prevents people from using family members to be able to obtain higher amounts based on LTV limits.
This comprehensive package of residential property market measure has been introduced almost at the same time as the Seller’s Stamp Duty amendment on industrial properties, which is meant to cool down the demand and enable the government to expand the supply. This also helps moderate the housing prices. This results in a tighter property ownership on investment, which includes the foreign buyers. The strengthened policy intent for public housing and executive condominiums technically discouraged over borrowing. As of January 12, 2013, the MAS will cap the MSR at 30% of the borrower’s gross monthly income. However, the MSR cap on HDB loans will be 35%. The 35% is already a reduced rate from the previous 40%. Permanent residents are prohibited from subletting the whole of their HDB flats. They also need to sell their flats within six months from the purchase date of another private residential property.
For executive condominiums, the maximum floor area for new EC units is capped at 160 square meters. The Dual key EC unit sale is limited to multi-generational families only. The private roof terraces and enclosed spaces are now considered as part of the gross floor area and subject to payment of charges. This satisfies the rule of balconies under the existing guideline of the URA.
