The Total Debt Servicing Ratio framework is the latest rule enforced by the Monetary Authority of Singapore (MAS). In short, this framework is a set of rules that restrict financial institutions from lending to an individual if his outstanding debt repayments (any debt, not only linked to property) exceed 60% of his gross income (including the potential new loan). The interest rate used for calculation of the new loan is 3.5% or the actual interest rate, whichever is higher.
Guarantors must not exceed the TDSR threshold as well.
From 11 March 2017, the TDSR has been relaxed for mortgage equity withdrawal loans with Loan-To-Value ratios of 50% or less. This is meant to help retirees to get cash from their real-estate investments.
Loan Tenure limit
Tenures of loans granted by financial institutions regulated by the MAS are limited to 35 years.
In case of co-borrowers, the income-weighted average age will be used, i.e. assuming Mr A (40) who earns $3,000 monthly and Mr B (30) who earns $2,000 apply for a loan, their income-weighted average age will be 36.
Loan-To-Value (LTV) limits
The LTV limit is the maximum percentage of the purchase price (price agreed upon between buyer and seller) or valuation price (given by the bank), whichever is lower, that can be borrowed from the bank. These rates were revised on 5 July 2018 as follows:
- 75% if you do not have any other outstanding loan. If you are a foreigner without PR status, some banks might cap at 65% or even 55%;
- 45% if you have one outstanding loan;
- 35% if you have two or more outstanding loans;
- 15% if you are buying under a company.
If your loan tenure is more than 30 years or the loan period would go beyond the retirement age of 65, these limits are lowered to:
- 55% if you do not have any other outstanding loan;
- 25% if you have one outstanding loan;
- 15% if you have two or more outstanding loans or if you are buying under a company.
The borrower must be the same person than the one purchasing the property.
Minimum Cash Down Payment
The remaining amount (from the LTV above) that cannot be borrowed from the bank has to be paid in cash or can come from a CPF ordinary account (mandatory saving account for Singapore citizens and Permanent Residents). However, there is a minimum percentage of the purchase price or valuation price, whichever is lower, that has to be paid in cash:
- 5% cash if you do not have any other outstanding loan;
- 10% cash if you do not have any other outstanding loan and your loan tenure is more than 30 years or the loan period would go beyond the retirement age of 65;
- 25% cash in all other cases.
Additional Buyer Stamp Duty (ABSD)
Anybody buying a residental property in Singapore is required to pay stamp duties (i.e. a tax) equivalent to roughly 3% of the purchase price or valuation price, whichever is higher. To cool the market, the government introduced an addtional stamp duty (the ABSD) which varies according to your immigration status (rates were revised on 5 July 2018):
- If you are a Singapore citizen, the ABSD is 0%/12%/15% if you are buying your first/second/third or subsequent property respectively.
- If you are a Singapore Permanent Resident, the ABSD is 5%/15% if you are buying your first/second or subsequent property respectively.
- If you are a foreigner (living in Singapore or not), the ABSD is 20% if you are buying your first or subsequent property.
- If you are buying under a company, the ABSD is 25% if you are buying your first or subsequent property. Developers are subject to an additional 5%.
Purchases by more than one individual will be subject to the highest applicable ABSD (some exemptions apply - see below).
Seller Stamp Duty (SSD)
To reign in speculation, sellers are required to pay a tax, the Seller Stamp Duty, which is a percentage of the selling price or valuation price, whichever is higher.
If you purchased your property between 30 August 2010 and 13 January 2011, the SSD rate is about 1%.
If you purchased your property between 14 January 2011 and 10 March 2017, the SSD rates are the following:
- If you sell less than 1 year after purchase: 16%;
- If you sell between 1 year and 2 years after purchase: 12%;
- If you sell between 2 and 3 years after purchase: 8%;
- If you sell between 3 and 4 years after purchase: 4%.
If you purchased your property on or after 10 March 2017, the SSD rates are the following:
- If you sell less than 1 year after purchase: 12%;
- If you sell between 1 year and 2 years after purchase: 8%;
- If you sell between 2 and 3 years after purchase: 4%.
Restrictions regarding Public Housing
Housing sponsored by the government (HDB flats) have extra restrictions:
- The Mortgage Servicing Ratio (MSR), i.e. percentage of income that can pay for the loan, is capped at:
- 30% if the loan is granted by a private institution such as a bank
- 35% if the loan is granted by the HDB
- Permanent Residents are not allowed to rent out their entire unit (which requires approval from the HDB);
- Permanent Residents who own a HDB flat must sell their flat within 6 months of purchasing a private residential property in Singapore.
From 11 March 2017, all these rules apply whether the property is transacted directly or through transfer of equity interest in a residential Property-Holding Entiry (PHE).
Exemptions and Reliefs
If you own a residential property in Singapore, you are not subject to these limits when you obtain a housing loan for the purchase of a property which is an Executive Condominium (EC) purchased directly from a property developer or a HDB flat (which requires you to dispose of your previous flat)
- Nationals from the USA, Switzerland, Norway, Iceland, and Liechtenstein are exempted from paying the ABSD for foreigners. The ABSD rule applying to them is the same than Singapore citizens.
- Married couples with at least 1 Singapore citizen will be exempted from paying the ABSD if: