Re-pricing of loan implications

[bargain hunter]

reading bro lifeline's post http://forums.condosingapore.com/showpost.php?p=452337&postcount=5 :

"not just refinance. repricing also kana TDSR.
last time banker says just look at the 1st 2 years rates cos reprice after that.
now we know that is not true.
TDSR reaches back to catch all those who bought multiple properties through OVERleverage and OVERstretching."

set me thinking. maybe bro newbie11 can help me out here.

i think its more applicable to CCR properties bought in 2007 boom.

Say there's a multiple property investor who bought 5 properties by paying 20% down and borrowing 80% during the boom of 2007. he kept refinancing his loan till 2011 when he secured a 0.75% + sibor for first 3 years. come next year when the 3 years is up, supposing under TDSR, he can only hold on to 1 property loan. what happens to the other 4 properties? he will get a loan recall on all 4 of his properties?

that will mean he will not just kenna a margin call top up? that would be equivalent to a loan recall?

like that isn't it the same as goldman sach's recall on blumont directors?!?!?!?!

[lifeline]

and if the documents submitted for re-pricing shows that not eligible for the loan, what happens or still can just accept the whatever exhorbitant rates?


i think what happens in real time will be like this:

apply for repricing to bank - fails
then no choice will just continue with the `thereafter rates'.

i dun think the bank will purposefully initiate a recall... unless the mortgager miss / default on 1 or more installments (up to the bank's internal threshold - varies with the market), or market crashes. i am sure the banks make their own risk assessment and know who these mortgagers (potential liabilities) are.

in preparation, that investor should start to deleverage now... either by selling off 1 or more units, or pare down some loans, or keep more cash / preserve cpf for that margin call, or start preparing to amass cash from available sources.

[bargain hunter]

i think that's still ok then. just banks get to make obscene margins lor!

but its rather ironic. becoz someone fails TDSR, the bank whacks a higher margin resulting in higher payments and further busting of the 60% limit. haha.

[lifeline]

i think that's still ok then. just banks get to make obscene margins lor!

but its rather ironic. becoz someone fails TDSR, the bank whacks a higher margin resulting in higher payments and further busting of the 60% limit. haha.


i think just the msr will go up. but the tdsr should not be further affected too much (is already affected in the first place).
hopefully the price now is better than in 2007 for that person... then ltv will be better. if bought at high in 2007, then just got to unload 2 to deleverage back to 60% for remainder. but like this, really bohua, tahan through the real dip to be caught by man-made tdsr. maybe all those ccr price drops that you have been reporting are sold by these multiple purchasers doing deleveraging, in addition to decoupling, or both?

[princess_morbucks]

i think just the msr will go up. but the tdsr should not be further affected too much (is already affected in the first place).
hopefully the price now is better than in 2007 for that person... then ltv will be better. if bought at high in 2007, then just got to unload 2 to deleverage back to 60% for remainder. but like this, really bohua, tahan through the real dip to be caught by man-made tdsr. maybe all those ccr price drops that you have been reporting are sold by these multiple purchasers doing deleveraging, in addition to decoupling, or both?

Luckily MSR is not applicable to private property.

[bargain hunter]

feels like it. could be one of the reasons. de-leveraging.

luckily the scenario above is just a hypothetical one lah. :ashamed1:

but there would clearly be some urgency to sell if their interest rates are gonna go up from 0.75% + SIBOR to 1.9% + SIBOR if they have multiple properties which are big, huge quantum and/or having low rental yields!





i think just the msr will go up. but the tdsr should not be further affected too much (is already affected in the first place).
hopefully the price now is better than in 2007 for that person... then ltv will be better. if bought at high in 2007, then just got to unload 2 to deleverage back to 60% for remainder. but like this, really bohua, tahan through the real dip to be caught by man-made tdsr. maybe all those ccr price drops that you have been reporting are sold by these multiple purchasers doing deleveraging, in addition to decoupling, or both?

[relax88]

Interesting conversation, but what if the investors paid up in full with zero loans.

think someone ever flash bank account with close to 5m on standby to buy:eek:

would that mean a even better time to buy for ready buyers:confused: or should just wait

[chiaseed]

Bank will not take into account the rental amount received from the property as part of the total income in TDSR assesement when re-pricing the loan of the same property.

[teddybear]

No lah, banks how to whack higher margin when most loans are now SIBOR + x % where the x is now fixed?
But true for the loans under old board rate (You know what,"board rate" is actual "Bill yOu Any Rate will Do" rate! :banghead:


i think that's still ok then. just banks get to make obscene margins lor!

but its rather ironic. becoz someone fails TDSR, the bank whacks a higher margin resulting in higher payments and further busting of the 60% limit. haha.

[Ringo33]

If you are still with old SOR package, there is actually no need for repricing.

[phantom_opera]

Buy local bank stocks now ;)

[thomastansb]

If those 5 properties are bought during the boom, then quite jia lat.

But if those 5 properties are bought before 2007 or during 2009 Q1/Q2, then pretty okay.

Banks will take the rental as 70% of income. Let's say you have 5 properties renting out at 3k a month and you earn 5k a month.

The banks will take 3k x 5 = 15k. 15k x 70% = 10.5k. 10.5k + 5k income = 15.5k. So they will assess you based on 15.5k income.




reading bro lifeline's post http://forums.condosingapore.com/showpost.php?p=452337&postcount=5 :

"not just refinance. repricing also kana TDSR.
last time banker says just look at the 1st 2 years rates cos reprice after that.
now we know that is not true.
TDSR reaches back to catch all those who bought multiple properties through OVERleverage and OVERstretching."

set me thinking. maybe bro newbie11 can help me out here.

i think its more applicable to CCR properties bought in 2007 boom.

Say there's a multiple property investor who bought 5 properties by paying 20% down and borrowing 80% during the boom of 2007. he kept refinancing his loan till 2011 when he secured a 0.75% + sibor for first 3 years. come next year when the 3 years is up, supposing under TDSR, he can only hold on to 1 property loan. what happens to the other 4 properties? he will get a loan recall on all 4 of his properties?

that will mean he will not just kenna a margin call top up? that would be equivalent to a loan recall?

like that isn't it the same as goldman sach's recall on blumont directors?!?!?!?!

[Jonathan0503]

I was repriced my loan but never kena TDSR leh?

[Ringo33]

I was repriced my loan but never kena TDSR leh?

Most likely to affect those extreme cases where the owner is highly geared and has got no substantial income outside property.

[bargain hunter]

fully paid of course no issue.

problem is, there are people who bought in 2007 multiple properties worth 5m or more each yielding 2%+ and borrowed 80% on it. like bro ringo has said, little income outside of ppty type of full time ppty investor.




Interesting conversation, but what if the investors paid up in full with zero loans.

think someone ever flash bank account with close to 5m on standby to buy:eek:

would that mean a even better time to buy for ready buyers:confused: or should just wait

[RCT]

fully paid of course no issue.

problem is, there are people who bought in 2007 multiple properties worth 5m or more each yielding 2%+ and borrowed 80% on it. like bro ringo has said, little income outside of ppty type of full time ppty investor.

What rental? Maybe have not even TOP yet... hahaha

[newbie11]

Bank will not take into account the rental amount received from the property as part of the total income in TDSR assesement when re-pricing the loan of the same property.

Rental recognised at 70% apportioned according to borrowers income if tenant has more than 6 months

[newbie11]

Those on guarantor or the outlawed methods may find themselves with no options. Likewise fir board rates

[Violinbite]

If you are still with old SOR package, there is actually no need for repricing.

Does it mean it will be ok if I signed a SOR package just a week before TDSR implementation? Keep this package and let it run thereafter?

[lifeline]

Does it mean it will be ok if I signed a SOR package just a week before TDSR implementation? Keep this package and let it run thereafter?

is there still sor package recently? you just got to check on the comparative interest rate intermittently. sor currently is almost half sibor... so definitely better until it shoots up, or until you are out of lock in if any.

[Violinbite]

is there still sor package recently? you just got to check on the comparative interest rate intermittently. sor currently is almost half sibor... so definitely better until it shoots up, or until you are out of lock in if any.

I happen to refinance a property just before the implementation of TDSR. Package offered by ANZ bank. The minimal spread is at 1 or 1.1% if SOR falls below negative region. I didnt think too much at this moment as the package just role out in Oct this year in effect under a 2 year deal. Third year will be higher then.

[civic3106]

Refer page 3 of 15 Q3.

[bargain hunter]

so for single ppty and owner occupied its ok.

but no exemption for multiple property investors.


Refer page 3 of 15 Q3.

[chiaseed]

Rental recognised at 70% apportioned according to borrowers income if tenant has more than 6 months

For rental of properties other than the property to be repriced, yes 70% of those rentals are recognised as income. But, the rental of the repriced property will not be recognised as income at all, even if the tenancy agreement is more than 6 months. This applies to at least one of the local banks.

[teddybear]

This is not inline with the TDSR guidelines, but if the bank don't want your business or don't want to loan so much, they can always reduce some income/asset sources (e.g. don't count your liquid assets in stocks and bonds) to bump up a person's TDSR and hence say no you are not eligible for so much loan etc? :rolleyes:


For rental of properties other than the property to be repriced, yes 70% of those rentals are recognised as income. But, the rental of the repriced property will not be recognised as income at all, even if the tenancy agreement is more than 6 months. This applies to at least one of the local banks.

[newbie11]

Banks may interpret guidelines differently and more conservatively. U can argue that with no income, pledging should enable a borrower to obtain financing. But banks may not think this way due to risk

[henryhk]

Assuming interest rate is rising next year, it is better to go for bank board rate or sibor rate ?

[RCT]

Why do you need to refinance? Just don't refinance la?

[amk]

Assuming interest rate is rising next year, it is better to go for bank board rate or sibor rate ?

NEVER EVER take "board rate" !! SIBOR is the fair market rate.

[Violinbite]

Buy local bank stocks now ;)

Why local bank stocks? I thought they face difficulty in securing local residential borrowing loans with the coling measures this moment?

[lifeline]

Why local bank stocks? I thought they face difficulty in securing local residential borrowing loans with the coling measures this moment?

cos all those hit by tdsr will have to continue with the higher thereafter rates. banks esp the one with largest number of mortgagers become the incidental winners.

[Violinbite]

cos all those hit by tdsr will have to continue with the higher thereafter rates. banks esp the one with largest number of mortgagers become the incidental winners.

Thats very true.. it means those affected by affected by TDSR will have essentially 2 or 3 years to lower their debt level right? But I understand from another brother posted on TDSR guideline that, if one had multi-properties but essentially only have one property loan to service and all the rest paid up, will not be affected by TDSR, hope this is correct.

[lifeline]

Thats very true.. it means those affected by affected by TDSR will have essentially 2 or 3 years to lower their debt level right? But I understand from another brother posted on TDSR guideline that, if one had multi-properties but essentially only have one property loan to service and all the rest paid up, will not be affected by TDSR, hope this is correct.

ya. tdsr affects only those with outstanding loans only.

[princess_morbucks]

Thats very true.. it means those affected by affected by TDSR will have essentially 2 or 3 years to lower their debt level right? But I understand from another brother posted on TDSR guideline that, if one had multi-properties but essentially only have one property loan to service and all the rest paid up, will not be affected by TDSR, hope this is correct.

"The new policy states that property loans extended to borrowers cannot exceed a TDSR of 60%."

So for eg you earn $10k per month (excluding commission and non fixed bonus) and do not have any other loan, then you can pay up to $6k per month for your housing loan.

However if you have outstanding study loan, car loan , renovation loan, etc, all these will be taken into account in calculating your TDSR, ie you may not be allowed to service the loan at $6k per month.

In addition for HDB and EC, the MSR cannot be more than 30% of your monthly salary.

[Violinbite]

"The new policy states that property loans extended to borrowers cannot exceed a TDSR of 60%."

So for eg you earn $10k per month (excluding commission and non fixed bonus) and do not have any other loan, then you can pay up to $6k per month for your housing loan.

However if you have outstanding study loan, car loan , renovation loan, etc, all these will be taken into account in calculating your TDSR, ie you may not be allowed to service the loan at $6k per month.

In addition for HDB and EC, the MSR cannot be more than 30% of your monthly salary.

Thanks for the input.
Currently I m in this situation and wondering what is the best i can make from the current policies:-
Have a HDB currently staying, mortgage will be over in 3Q2016
Bought a 2bed PC in 2010, recently managed a re-finance before TDSR kick in under SOR 2-year package. - this for rental
Bought also a 3bed PC awaiting TOP in late 2016 or early 2017 - this one w intend to use it as owner-occupied and rent out HDB (fully paid up by then for the HDB)

At this point, certainly I am still under the radar of TDSR, but does it mean, if my HDB and 2bed PC is fully paid up, then the 3bed PC will not be under TDSR as this one will be owner-occupied once TOP? Not sure if I have put it up correctly?

Thanks for any advice.:)