Fine-Tuning Total Debt Servicing Ratio For Home Owners to Enjoy Zero-Interest-Rate-Policy to The Fullest

fine tuning TSDR 2016 09 01

The Monetary Authority of Singapore (MAS) has just announced today that, with immediate effect, owner-occupied residential property owners can now refinance their mortgage without the ceiling of Total Debt Servicing Ratio (TSDR).

As for non-owner-occupied properties, owners can enjoy this exemption only when the following two conditions are met:

  1. Commits to a debt plan with his financial institution to repay at least 3 percent of the outstanding balance over a period of not more than three years; and
  2. Fulfils his financial institutions’ credit assessment

How can I benefit from this change?

Nobody knows how long will the current Zero-Interest-Rate-Policy (ZIRP) last till, so while it is still low, isn’t it the best time to quickly clear your mortgage and fully redeem your property?

Let’s say you are comfortable to service your mortgage at 90% of your monthly income, here is how much time and money you could save if you were to refinance your loan tomorrow.


  • Monthly income – $5,000
  • Property value – $811,645
  • Interest rate – 2.0%
  • Max loan repayment (with TDSR) – $3,000
  • Loan repayment @ 90% (without TDSR) – $4,500

Using a simplistic example, with constant monthly repayment and ceteris paribus, you will cut short your loan by 12 years and avoided paying over $115,000 of interest.

interest avoided for refinancing to shorter tenure.JPG

How will this change impact the property market?

In the short run, there is technically no impact to the property market because this change is targeting at existing owners only.

There is no change in TSDR restriction for new property purchase. You can still only loan up to the ceiling of 60%.

However, in the long run, when more properties are redeemed earlier, owners will be able to buy the next property earlier with the interests cost avoided to pay additional buyer’s stamp duty which is likely to stay for awhile more.

Furthermore, down payment will be low as they would be able to take 80% loan with a debt-free status (instead of 50% loan when they are still serving an existing loan).


All in all, this is a good start from the government to calibrate the market with a long-term perspective allowing property owners the flexibility to service their mortgage at a higher debt ratio in order to take advantage of the current ZIRP.





When ABSD becomes basic BSD


when absd becomes bbsd

We have heard countless times from different ministers on being too early to lift or even relax the property cooling measures, particularly the additional buyer’s stamp duty (ABSD) introduced in Jan 2013. What if the ABSD is here to stay and to merge with the existing buyer’s stamp duty (BSD)?

Perhaps when it is not an “additional” tax, buyers currently holding back will be more willing to embrace the new norm?

With the ever increasing sums needed for nation building, a steady stream of taxes is important to sustain Singapore’s growth as a nation. Social development has always been a big chunk of the nation’s spending at 52.9% in 2015, and as our population ages, more funds will be needed to cater for these social needs. Where do you think the money comes from?


Tax spending fy2014_2015.JPG
Source: IRAS – The Singapore tax system 


Furthermore, in order to remain competitive in attracting foreign businesses and high net worth individuals to Singapore, corporate and income tax have always been kept low and it will most likely to stay like this.

So where do you think the money have to come from? Road tax, cars COE, Property taxes, stamp duties.

Okay you see the point.

Let’s say only 15% of citizens have paid 7% for their second property after the introduction of ABSD. Within the next two years, another 30% – 50% will accept the fate to pay the 7%.

Sooner or later,  when half of Singaporeans have already paid the ABSD for their second property, it would somehow be seen as the new norm.

When the time comes, would it be easy to merge ABSD to the existing BSD?

And will there still be a mental barrier for buyers to wait further?




Keep Calm and Buy a Home – A Gentle Reminder

KEEP Calm and buy a home a gentle reminder

Four months ago, I wrote a post to encourage first timer home buyers and upgraders to keep calm and buy a home right after a statement mentioned by Minister Lawrence Wong in Parliament.

Today, we have yet another statement from managing director Mr Ravi Menon of Monetary Authority of Singapore (MAS) who says “It is too early for the Government to consider lifting the property cooling measures“.

If you have not taken action in the last four months, you could have already missed some good opportunities. From March to today, there were 8,284 private non-landed transactions and 8,404 HDB transactions.

Just by looking at the volume since march, many have already accepted that fact of cooling measures is going to stay for awhile longer and strategized their portfolio accordingly.

Total hdb transaction in 2016 0727

Total private non landed transaction in 2016 0727
Source: Squarefoot Research

If you are still hopeful for cooling measures to be lifted assuming that it is the only way for market to recover, you may be wrong. The market can still recover without lifting cooling measures.


Hence, a gentle reminder for first timer home buyers and upgraders, wait no further. And for current home owners who are hesitant to pay additional taxes for your second or third properties, do be informed that there are some entry prices in certain districts still looking attractive even after paying the taxes. If you are thinking of prime district, you have to check out Gramercy park.

Finally, there are many things in life we can delay or wait; wait for promotion, wait to win lottery, wait to go on holiday, wait for Mr or Ms Right, but there is one thing you cannot wait.

Your age.

How many more years can you wait before you realise you are not eligible to get the maximum loan tenure anymore?





Keep Calm and Buy a Home

KEEP Calm and buy a home
Keep Calm and Buy a Home

Cooling measures are not anywhere near its last days as stated by Minister Lawrence Wong in Parliament on 28th Feb, 2016. Instead of joining the speculation and sit on the fence, first-time buyers and upgraders could take this opportunity to realize their home ownership goals.

Cooling measures quick fact

  1. General Intention
    • To regulate property market and prevent bubble
    • To protect citizen who are truly home owners (to be).
  2. ABSD – Additional Buy Stamp Duty
    • To reduce the increased demand of investors globally
    • To discourage locals from buying more than one property
  3. SSD – Seller Stamp Duty
    • To reduce speculators and short term property flippers
    • To prevent property market bubble
  4. TDSR – Total Debt Servicing Ratio
    • To disallow individuals to overleverage on loans of all kinds
  5. LTV – Loan-to-Value
    • To disallow overleveraging property purchase (lesson learnt from subprime crisis in 2008)

Are you affected by the cooling measures?

Types of buyer (5)
Types of Buyer in a Cooled Property Market


First Timer

Being ‘fresh’ in the property arena, you certainly have the upper hand when there is an excess supply of properties in the market and being pretty much immune to cooling measures. In such situation, buyers who are citizens have to get prepared and seize the opportunity when a good deal arises. The first task is to do a loan assessment with the bank or HDB to have a gauge on the property price tag that is within your means. A quicker way to get an estimate is to use this tool.

Next step is to understand your eligibility and the reason for this purchase. Is it to stay in or to rent out? This will kick start a series of decisions as such location of property, timing of purchase, interior design and furnishing etc. Unless you have the time, it is recommended to consult a professional on this.


If your last property purchase was before 14th Jan 2011, you would have equal (or more) advantage than the first timers. Just few days back, a five-room DBSS unit at City View @ Boon Keng set a record selling price at $1.028 million. With a decent sum from the sale proceeds; upgraders can then look for bigger, more central location home or even an upgrade from public to private housings, depending on individual’s long term plan.

Even though you may have some experience from the last property purchase(s), the numerous policy changes from 2010 to 2013 will probably make your new purchase much more complicated and engaging a professional will certainly provide you a more accurate assessment. One noteworthy policy change is the TDSR that pulled the brake of property price hike in Q4 2013.

Landlord Wanna Be

Since your last property purchase, you may have accumulated cash and liquid assets that are sufficient to buy a second property without selling the current property. Together with various influence from the media and people around, you are eager to jump onto the bandwagon of landlords and possibly start a passive income flow. Unfortunately, you are 4 years too late from the start of the ABSD and 2 years behind from the start of TDSR. Yes, if you are feeling the crunch, this is what the cooling measures are put in place for. It is just the way it is.

Such measures are well-analyzed to make landlord wanna be realize that the previously attractive investment are now having a much smaller Rate of Returns and eventually force them to take a step back to reconsider other alternatives to spend their spare cash.


Most of us do not belong to this category where an additional 10% ABSD is still not a turn off. Nevertheless, most wise investors with the end goal of profits should find very little worthy property investment left as well.

What’s next?

If you are a first timer or an upgrader, good for you! The ball is in your court now! Unless you have a rich uncle that can sponsor you one as a gift let us get back to the proper, less risky and wiser approach.

  1. Understand which stage of buying process are you at now?
  2. Research and do lots of homework. Remember the days where you spent so much time deciding on which car, watch or phone to buy? You can easily do a proportional increase to get the time needed for this property purchase, based on dollar value alone.
  3. Find a good professional for advice. Be it property agents, bankers or lawyers.
  4. And finally, make sure you have fun in this process

Neither this process nor the property price retracement will be a short or simple one, just keep calm and ultimately buy a Home!