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If the last time you travel for property hunting was in 2010 or prior to that year, you could be in for a headache. Try purchasing a new house now, and you will realize that there are a lot of limitations that didn’t happen before. To make it easy, we have piled up a list of the main updates that you have to know about. Here’s what’s changed:
1. The rules about loan tenancy and age have changed
In October 2012, the Monetary Authority of Singapore (MAS) concluded we were in debt for way longer than is healthy. This bring out in a large transformation toward maximum mortgage tenancies, which now influence in your age.
The maximum loan tenancy is now 35 years. Furthermore, if your loan tenancy surpasses 30 years, or your loan tenancy plus your age, surpasses 65(the assigned retirement age), you will get a maximum a Loan-to-Vale (LTV) proportion of 60 per cent. For an instance:
Let us assumed that you are 42 years old, and you want to have a 25 year loan to purchase a new unit. This would surpass the maximum retirement age of 65 (42 + 25 = 67). If the unit prices $1.5 million, the maximum mortgage – at an LTV of 60%– would be $900,000, and the deposit would be $600,000.
If you have a co-debtors, the bank will utilize you IWAA (Income Weighted Average Age). For example, suppose your spouse is the co-debtor. Your joint “age” will be computed as follows:
(Age of debtor A x monthly income of debtor A) + (Age of debtor B x monthly income of debtor B) / joint monthly income of the debtor A and B
For example, let us presume that you earn $7,000 per month, at the same time your spouse earns $3,500 per month. Your spouse is 39 years old, and you are 42 years old. Your IWAA would be:
(42 x 7000) + (39 x 3500) / 10500 = 41
To acquire the full LTV of 80 per cent, your loan tenancy cannot surpass 24 years (24 + 41 = 65).
(Take note that, if a co-debtor has no income, they are not included from the IWAA computation).
2. The Total Debt Servicing Ratio (TDSR) is here to assist with the tough task of property loans. Help make it harder, that is.
In June 2013, MAS released a surprise on the property market. It passed the Total Debt Servicing Ratio (TDSR) framework, which covers your property loan repayments to 60 percent of your income (comprehensive of other debts).
So if you will have $5,000 per month, your property loan repayments plus your other obligations (personal loans, credit card loans, car loans, etc.) cannot surpass $3,000 a month. If it would be greater than this, you must to apply for a smaller loan.
Furthermore, there is a trim on income that is not derivative from stable salaries. Suppose to be you are a self-employed, or you have an income from leasing out properties, these count as being 30 per cent lesser for TDSR purposes.
For example, if you earn $5,000 per month on commissions, you would count as earning $3,500 per month. Your all-out monthly repayments cannot surpass $2,100 per month.
If you’re just considering to refinance however, you can relax – the TDSR limitation won’t apply to refinancing, if you purchase your condo before it came into effect.
You may also want to remember that the TDSR is not, as is usually believed, a property cooling measure. The TDSR is an organizational transformation in loan process, that means it’s more or less stable.
3. COV (Cash Over Valuation) is no longer settled separately
Remember how we used to negotiate the COV on a resale flat, once finding out the real cost?
It does not occur anymore. HDB cancelled it in March 2014.
So, from now on, you have to negotiate the whole cost of the resale flat first while hunting a property. When the Option to Purchase (OTP) is in place, that’s the time the HDB will give you the actual cost of the flat. Any amount in additional of the valuation is the COV.
For an instance, suppose you approve to purchase a resale unit for $700,000, because you have an allergy to money or something. After signing the OTP the HDB valuation tells you the unit costs $650,000 only. The excess $50,000 becomes the COV.
That said, take note that COVs are disappearing because of this. If you’re selling, you can not any more assume that it is a norm. Also, note that the typical OTP for apartments has been elevated from 14 days to 21 days.
To make certain you are getting a value close to valuation, settle up the neighborhood on propertyreview.sg. Purchasers, peg your proposal to the amounts of surrounding units, before making any proposals. Vendors, observe your competition (other listings in your area), and try to stay realistic.
4. The ABSD guidelines have been further updated, since 2011.
You may be familiar with the Additional Buyers Stamp Duty (ABSD) now, since it came about in December 2011. In circumstances like you have been out of the property hunting circuit since 2010, the ABSD has been updated several times, and the amounts are now different.
The original ABSD was a 10 per cent tax on foreign purchasers. Permanent Residents (PRs) would have a fee of 3% ABSD on 2nd and on the following properties, and Singapore citizens would pay 3 cent ABSD on the third and succeeding properties.
Nowadays, the ABSD is fifteen per cent for foreign purchasers. PRs have a payment of 5 per cent ABSD on their 1st property, as well as ten per cent on 2nd and on the succeeding properties. Singaporean purchasers pay 7 per cent ABSD on their 2nd property, and 10 per cent on the following properties.
A significant note if you’re trying to sell your unit and purchase another house:
If you’re a resident, and have set your heart on purchasing this beautiful unit even though property hunting before trading your present unit, you need to pay the 7 per cent ABSD first. The new house is precisely your second property. But if you sell your unit in just six months of purchasing your other house, you’ll be refunded for the ABSD.
Yes, it’s tiresome and demanding; which is why you actually should sell before purchasing. Even if it means staying with the in-laws for a period of time.
5. SSD (Seller’s Stamp Duty) has been diminished. Somewhat one thing got easier.
The SSD (Sellers Stamp Duty) was diminished in March 2017. The SSD is a tax executed on sales profits, when a house is sold too early after its purchased.
Formerly, the SSD charges were:
– 12% if sold within the second year
– 16% for houses sold within the first year of purchase
– 4% if sold within the fourth year
– 8% if sold within the third year
And today’s SSD rates are:
– 12% if sold within the first year of purchase
– 4% if sold within the third year
– 8% if sold within the second year
We as well feel a need to say something given the en-bloc fever
Here’s a slight recognized detail to increase your blood pressure:
If you purchase a property subsequently months of property hunting, as well as it goes en-bloc in a period of the first 3 years, you get the “due” of paying the SSD. Indeed, even if you didn’t voted on it, and there’s nothing you can do about it. Just something to preserve in mind, if you want to purchase in expectation of an en-bloc sale.