Will the changes to Singapore's property cooling measures affect you?

Will the changes to Singapore's property cooling measures affect you?
PHOTO: The Business Times

This article was originally on GET.com at: Will The Changes To Singapore's Property Cooling Measures Affect You?

Over the past week, the various tweaks to some of the property cooling measures in Singapore have flooded the news.

Will these tweaks work to your advantage as a homeowner, home seller, or home buyer? We zoom in on the two main changes and how they might affect you.

Will the changes to Singapore's property cooling measures affect you?

1. Removal of TDSR for mortgage equity withdrawal loans with LTV 50 per cent and below

For those of you who have been facing restrictions stemming from the Total Debt Servicing Ratio (TDSR) framework when it comes to monetising your residential properties, take heart that you may now be able to use your home as collateral when borrowing money.

In a move to help ease financial strains of eligible borrowers in the challenging economy, the government has announced that the TDSR will not apply to mortgage equity withdrawal loans where the ratio of the loan you're intending to take on, including your existing loans, to your property's value is not more than 50 per cent.

Previously, such loans were subject to the TDSR framework where a borrower's total debt obligations - including existing mortgage, personal loans, car loans, credit cards (etc.) - couldn't go beyond 60 per cent of his monthly gross income.

You may appreciate the option to generate cash flow

As an extension from the above point on using one's home as collateral, homeowners who are eligible can use the extra cash to fund their kids' education, invest in stocks or even start businesses.

But then again, you need to be prudent even though you may have access to extra cash. Bear in mind that a mortgage equity withdrawal loan is in essence still a financial commitment that needs monthly loan repayments.

Think about and fully comprehend your needs, how you will be using this increased cash flow, and how you'll be financing the monthly loan. You don't want to be bogged down in a mid- to long-term financial commitment on a whim.

2. Adjustments to seller's stamp duty

Property owners who sell their properties within the specified tiered holding period will be required to pay the Seller's Stamp Duty (SSD). Previously, the SSD applied to homes that were sold within four years of being bought.

One recent tweak to this is that the SSD holding period will be slashed from four to three years. So, homeowners who sell their properties after three years from the date of purchase will not be slapped with the SSD.

Additionally, the SSD rates will be lowered by four percentage points. For example, a homeowner who's selling his property within a year of purchase will have to pay an SSD of 12 per cent instead of the previous 16 per cent. These two SSD changes apply to homes purchased on or after 11 March, 2017.

For those who need to sell their properties due to unexpected circumstances, the latest SSD tweaks impose less financial penalty. Investors looking to flip their properties a few years down the road will also benefit from the revised regulations.

Source: Ministry of Finance

The changes are unlikely to have a huge impact on Singapore's property market

The main property cooling measures - Loan-To-Value ratio (LTV), Additional Buyer's Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) for new loans - remain unchanged amidst the above-mentioned tweaks. And these are not expected to be lifted any time soon. Besides, interest rates are expected to rise further in time to come.

Those who are shopping around for homes should be prudent with their home buying options and consider a longer term view of their financial circumstances to make sure they are not overstretching themselves financially.

Before you commit yourself to a new property and home loan, you can learn more about the factors affecting the value of your property here and how you can find a suitable mortgage package in Singapore.

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