Notice 825 Residential Property Loans
Rules for finance companies when granting residential property loans to individuals and non-individuals.
Explainers
Rules for New Housing Loans
Rules for financial institutions (FIs) on new housing loans, including maximum limits on loan tenure, loan-to-value ratio, mortgage servicing ratio and total debt servicing ratio.
Overview
Property loans can be large, long-term liabilities for most individuals and households. Maximum limits on loan tenures and amounts help to ensure that borrowers don’t overstretch themselves when purchasing property.
The objectives of the housing loan rules are to:
- Encourage financial prudence among borrowers.
- Prevent borrowers from circumventing LTV limits and TDSR thresholds.
- Ensure long-term household economic health.
- Strengthen credit underwriting standards at FIs.
- Ensure long-term stability in the property market.
Housing Loan Rules
Below is a summary of the rules on maximum limits for new housing loans.
| Rule | Description |
|---|---|
| Loan Tenure |
|
| Loan-to-Value (LTV) | The maximum amount that an individual can borrow for a housing loan based on the loan tenure, borrower’s age, borrower’s existing loans and whether the borrower is a shell company. |
| Mortgage servicing ratio (MSR) |
No more than 30% of a borrower’s gross monthly income should go towards repaying all their property loans, including the loan being applied for. Only applies to the purchase of HDB flats and ECs. |
| Total debt servicing ratio (TDSR) | No more than 55% of a borrower’s gross monthly income should go towards repaying all their debt obligations, including the loan being applied for. |
In addition, FIs must also:
- Deduct discounts, rebates or benefits when calculating the purchase price of a residential property.
- Ensure that borrowers are also the mortgagors of the property.
- Ensure that guarantors are brought in as co-borrowers if they are standing guarantee for borrowers who have not met the TDSR threshold requirements.