Arcachon
03-02-20, 14:31
In the past, asset-based lending was widespread and investors with a few hundred thousand dollars in the bank were eligible for multi-million dollar loans without the need to ascertain their loan servicing eligibility. This was scrapped with the introduction of the Total Debt Servicing Ratio (TDSR) framework in June 2013. As such, the days of easy credit are over.
There are two types of pledged assets, namely liquid assets such as Singapore dollar deposits, and savings and other securities like stocks, bonds, foreign currency deposits, and gold.
This strategy of property financing works when buyers have zero or insufficient income to support their loan application. Although they may be cash-rich, the lack of income proves an obstacle for banks to grant a loan. Hence, asset pledging helps to increase their income to levels that are in line with the TDSR criteria and allows them to qualify for purchasing the property which they might otherwise not be able to do.
Assets that are pledged for at least four years are taken at 100 percent of their value. If they are pledged for less than four years, an immediate haircut of 70 percent of their value is applied.
For instance, in the case of an unemployed person, for every loan of $100,000, about $36,000 in liquid assets must be pledged for four years, but this rises to $120,000 if it is pledged for less than four years.
To utilize this strategy, buyers would need to have a significant amount of savings, assets or financial support.
In summary, the optimal use of funds and structuring of financing strategies is an area that investors should continually explore to put their savings to work. Property investment is a lifelong journey of learning and fine-tuning strategies that pays huge dividends for investors.
There are two types of pledged assets, namely liquid assets such as Singapore dollar deposits, and savings and other securities like stocks, bonds, foreign currency deposits, and gold.
This strategy of property financing works when buyers have zero or insufficient income to support their loan application. Although they may be cash-rich, the lack of income proves an obstacle for banks to grant a loan. Hence, asset pledging helps to increase their income to levels that are in line with the TDSR criteria and allows them to qualify for purchasing the property which they might otherwise not be able to do.
Assets that are pledged for at least four years are taken at 100 percent of their value. If they are pledged for less than four years, an immediate haircut of 70 percent of their value is applied.
For instance, in the case of an unemployed person, for every loan of $100,000, about $36,000 in liquid assets must be pledged for four years, but this rises to $120,000 if it is pledged for less than four years.
To utilize this strategy, buyers would need to have a significant amount of savings, assets or financial support.
In summary, the optimal use of funds and structuring of financing strategies is an area that investors should continually explore to put their savings to work. Property investment is a lifelong journey of learning and fine-tuning strategies that pays huge dividends for investors.