On 4 September 2014, the Monetary Authority of Singapore (the "MAS") issued a Circular explaining the application of the following MAS Notices in relation to property loans given to borrowers who are individuals (i.e. natural persons) and who own residential property that has been gazetted to be acquired by the Singapore Government under the Land Acquisition Act, where the date of the Notice of Land Acquisition is 15 August 2014:

  • MAS Notices on Residential Property Loans: These refer to MAS Notice 632 issued to banks, MAS Notice 852 issued to finance companies and MAS Notice 1106 issued to merchant banks; and
  • MAS Notices on Computation of Total Debt Servicing Ratio for Property Loans: These refer to MAS Notice 645 issued to banks, MAS Notice 831 issued to finance companies and MAS Notice 1115 issued to merchant banks.

The key points explained in the Circular are as follows:

  • Loan-to-value ("LTV") limit: A financial institution ("FI") may grant an individual a credit facility for the purchase of a residential property to replace his acquired property ("Replacement Property") with a LTV limit of up to 80%, subject to certain conditions being satisfied.
  • Cash down payment requirement: The minimum cash down payment is required to be at least 5% of the property value.
  • Maximum loan tenure: The maximum loan tenure must not exceed the higher of 35 years and the remaining tenure of the credit facility for the purchase of the acquired property.
  • Total debt servicing ratio ("TDSR"): Subject to its credit assessment and underwriting criteria, an Fl may grant an individual a credit facility for the purchase of the Replacement Property that exceeds the TDSR threshold of 60% stated in the "Guidelines on the Application of Total Debt Servicing Ratio for Property Loans under MAS Notices 645, 1115, 831 and 128".

Reference material

The MAS Circular is available from the MAS website www.mas.gov.sg by clicking here.