Loan Tenure

LTV for home loan to non-individual borrower has been reduced from 50% to 40%. The former exclusions of MAS Notice 632 (Notice) on home loan agreements issued by banks to their staff for their own professional use have been deleted. Those regulations shall be applicable to new home loan operations or refinancing of outstanding home loan operations undertaken by MAS supervised banks with or without single borrower entities.

For new home loan, the regulations shall be applicable if the date on which the call options were issued or, if there is no call options, the date of the contract of sale, on or after 6 October 2012. Refinancing arrangements are subject to the provisions if the date of commencement of such arrangements is 6 October 2012 or thereafter.

The new MAS regulations provide for an upper ceiling of 35 years in total for all housing construction loan terms. From 6 October 2012, this shall be applicable to credits to private and non-private debtors and to funding credits. To calculate the 35 year ceiling, in a case where the Mortgagor requests a Funding Mechanism for an amount due from an active home loan, the amount of (i) the maturity of the Funded Mechanism and (ii) the interval between the first payment of the Mortgagor's first home loan to buy such home and the first payment of the Funded Mechanism shall not be more than 35 years.

stayed at 80% if each borrower has no other pending HDB or MAS supervised bank loan facilities for the acquisition of another home or can demonstrate that they sold their current home at the time the new home was purchased; effective July 27, 2011, LTV thresholds were established for credits not taken out for the acquisition of home but otherwise backed by home.

According to the new regulations, MAS has reduced the LTV for home loan to individual mortgage holders if: the repayment term exceeds the pension of 65 years. The LTV threshold will apply to these loans: 60 per cent for a borrowing party with no other housing loan portfolio due. The MAS also reduced the LTV rate for home loan to non-private debtors from 50% to 40%, regardless of the term of the loan.

Article 17(u) of the Notice provides that where a loan facilities is provided to common creditors, the term'borrower' shall be understood as referring to each creditor when the LTV threshold for common creditors is established. Therefore, where there is more than one individual with different maturity groups, the maturity of all individual beneficiaries should be taken into account and the pensionable maturity of the oldest individual should be taken into account.

One problem that has not yet been resolved by the recent changes to the Notice, however, is its application to buyers of non-borrowing real estate. As an example, when setting the borrower's pensionable ages, should a bank take into account the ages of non-borrower-buyers?

The author's opinion is that banks should consider applying the Notice to these third-party buyers; otherwise, it may be a way for a borrower to bypass the disciplines outlined in the Notice, which would be contrary to the intent and intent of the Notice. Those third-party lenders are finally and severally responsible, together with the borrower, to the banks for the loan due and it is reasonable that the thresholds also to them.

This new regulation, which came into force on 5 October 2012, does not apply to credits that are not taken out for the purpose of purchasing real estate.