Tighter loan limits, more cash upfront

Tighter loan limits, more cash upfront

HOME buyers will now have to stump up even more cash upfront after the Government moved to cool the property market in an environment of "extraordinarily low" interest rates.

The additional buyer's stamp duty (ABSD) - first introduced in December 2011 - will be raised between 5 and 7 percentage points across the board.

And the proportion of a home's value that a buyer can borrow, known as the loan-to-value (LTV) limit, will be slashed to as low as 20 per cent for certain buyers.

The minimum down payment for some buyers will also be hiked to 25 per cent. These changes affect those with at least one outstanding housing loan.

They were part of the seventh round of measures unveiled by Finance Minister Tharman Shanmugaratnam and National Development Minister Khaw Boon Wan at a press conference yesterday.

The measures are intended to help Singaporean couples buy their first home, which is the Government's first objective, and to protect all property owners from a price correction down the road, Mr Tharman said.

But he emphasised that measures such as the revised ABSD and tighter loan limits were "exceptional" ones put in place as counter-cyclical measures and are not permanent. Once the market has cooled, these measures will be reviewed, he added.

"Interest rates are abnormally low, abroad and in Singapore. That's why we've had to take this additional set of measures that we would not normally take, because we're not in a normal situation.

"So it's better that we calm the market now and get some softening of prices now than wait for a more destabilising correction later," he added.

For individuals getting a second housing loan on top of an outstanding one, the LTV limit will be cut to 50 per cent from 60 per cent. It will fall to 30 per cent if the loan term is more than 30 years or extends past the age of 65 of the buyer.

Those taking a third or subsequent housing loan will see their LTV slashed to 40 per cent or to 20 per cent if the loan term is more than 30 years or extends past age 65 of the buyer.

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