Tag Archives: Home Loan

20% of HDB loan applicants asked for larger loans

There were about 200,000 qualified applications for an HDB Loan Eligibility (HLE) letter from 2012 to 2015, revealed National Development Minister Lawrence Wong during a parliamentary session on Tuesday (1 March), reported Channel NewsAsia.

Flat buyers need to request for an HLE letter before they can obtain an HDB concessionary housing loan for their flat purchase.

Of this figure, 20 percent, or 40,000 of those who applied for the letter, appealed for a higher mortgage. Most did so to increase their housing options without stating an exact loan amount. Mr Wong was responding to a query from Non-Constituency MP Leon Perera.

“Over one in three of such appeals were successful,” he said in a written reply. The rest were not granted as the applicants could not prove that they have the resources to repay the larger loan.

“As a flat purchase is a long-term financial commitment, it would not be prudent for potential home buyers to take on additional financial burdens that they are unable to sustain,” he added.

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TDSR doing its job, stats show

The impact of the Total Debt Servicing Ratio (TDSR) framework is being felt, with less than 10 percent of existing borrowers having a TDSR of more than 60 percent, reported The Business Times, citing statistics from the Monetary Authority of Singapore (MAS).

In fact, the prevalence of highly leveraged borrowers has declined for new housing loans, said the MAS.

“Almost all new housing loans are below the 60 percent TDSR threshold, with a significant proportion of new borrowers having TDSRs of less than 40 percent.”

Moreover, borrowers are now taking out fewer mortgages. Borrowers with more than one loan accounted for 20 percent of all new housing loans in Q3 2015, down from the 30 percent seen in 2011.

With this, the MAS is encouraging households to prepay their home loans in order to avoid monthly repayments and higher interest costs.

Banks also noticed that households have improved the risk profile of their home loans by paring down their mortgages.

Tok Geok Peng, DBS Bank’s Executive Director of Secured Lending, believes that the property cooling measures have helped homeowners to downsize their loan commitment via debt consolidation, capital repayment and other means.

Sherry Leong, Head of Secured Finance Solutions at Citibank Singapore, added: “We do not foresee any impact to (borrowers) with respect to the transition period, which should be sufficient for them to make any changes to their refinancing arrangement if required.”

The MAS revealed that the purpose of the three-year transition period is to encourage highly leveraged borrowers to “right-size their loans as early as possible”.

In February 2014, the central bank introduced a concession which broadened the exemption of the TDSR to include homeowners who breached the 60 percent limit but were hoping to refinance the loan on the property that they live in.

As for investment homes, the MAS allows a grace period until 30 June 2017 for refinancing, should the borrower agree to pay down a portion (usually at least three percent) of the outstanding loan.