TDSR Rules on Refinancing Fine-tuned - MAS

Singapore, 1 September 2016… The Monetary Authority of Singapore (MAS) announced today that the refinancing rules under the Total Debt Servicing Ratio (TDSR) framework will be fine-tuned to allow borrowers more flexibility in managing their debt obligations. This is in response to feedback from some borrowers who are unable to refinance their existing property loans owing to the application of the TDSR threshold of 60 per cent.

2    The TDSR framework and threshold will continue to apply to new property loans. The refinements being introduced for refinancing of loans will enable borrowers to better manage their existing debts. They do not represent a relaxation of property market cooling measures.

Refinancing of owner-occupied housing loans

3    Under current rules, for owner-occupied residential properties bought before the introduction of TDSR, a borrower may be exempted from the TDSR framework when he refinances his housing loan.

4    MAS will now extend the same concession on refinancing to all owner-occupied residential properties, including those bought after the introduction of TDSR¹. This adjustment recognises that all new housing loans would have been subjected to the TDSR framework at inception.

Refinancing of investment property loans

5    Currently, for properties that were purchased for investment before the introduction of TDSR, borrowers can refinance above the TDSR threshold of 60 per cent if they commit to debt reduction plans when refinancing their loans.

6    MAS will now allow a borrower to refinance his investment property loan above the TDSR threshold, regardless of when the property was purchased, if he meets the following two conditions²:

(a) commits to a debt reduction plan with his financial institution to repay at least 3 per cent of the outstanding balance over a period of not more than 3 years; and
(b) fulfils his financial institution’s credit assessment. 

7    MAS reiterates the importance for borrowers to exercise prudence and reduce their debt burdens, as the current low interest rate environment will not persist indefinitely. Borrowers will face higher mortgage repayments when interest rates rise.

8    The revised rules will take immediate effect³. Please refer to the Annex for a summary of the rules.

9    MAS Deputy Managing Director, Mr Ong Chong Tee, said: “The TDSR is a structural measure to encourage prudent borrowing by households. The adjustments announced today will help borrowers to refinance their existing property loans at lower interest rates and better manage their debt obligations over time. They do not apply to loans for new property purchases and are not an easing of the property cooling measures.”

_{1 The same concession will be extended to the Mortgage Servicing Ratio limit of 30 per cent for the refinancing of housing loans relating to HDB flats and Executive Condominiums that are owner-occupied.}

_{2 This includes a loan secured on a borrower’s equity in a property.
3 This supersedes the 10 February 2014 announcement where a transition period ending 30 June 2017 was given to borrowers who purchased their properties prior to the introduction of TDSR to refinance their investment property loans above the TDSR threshold.} 

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Annex

SUMMARY OF TDSR RULES FOR REFINANCING OF PROPERTY LOANS
(WITH EFFECT FROM 1 SEPTEMBER 2016)

Type of Property Loan	Does the TDSR threshold/MSR limit apply at the time of refinancing?
Owner-occupied Housing Loans	No
Investment Property Loans	Yes, except where the borrower: a)      commits, at the point of refinancing, to a debt reduction plan with his financial institution (FI) comprising a repayment of at least 3 per cent of the outstanding balance over a period of not more than 3 years; and b)      fulfils the FI’s credit assessment.

Source: MAS (Last modified on 26 Nov 2016)