Update on TDSR (10 March 2017)

MND, MAS and MOF released a joint statement today to announce the relaxing of some residential property measures.

Here’s what you should know about the change in TDSR policies for properties purchased from 11 March 2017.

What this mean ?

Case Study

Uncle Sam is a retiree with no regular income. He own a fully paid property with market value $2 mil. He has a cash saving of $500,000 and is looking at purchasing a $1 mil property for investment.

Note : There are other cost involved in the purchase of property and multiple properties such as the BSD, Legal Fees, ABSD, SSD, etc. These are not used in this case study to simplified the example as they applied before and after the change of TDSR policy prior and after 11 March 2017. This example is to highlight the changes and what it means prior and after 11 March 2017.

BEFORE 

Uncle Sam can afford the $200k downpayment for the $1mil property, which would then required a 80% loan from the bank.

As Uncle same has no regular income, he is unable to secure any loan with the bank due to TDSR.

There is no way around this as TDSR applies to all local financial institute for property loan.

Result : Uncle Sam cannot invest in local property. He’ll have to look oversea for property investment.

NOW (From 11 March 2017)

With a cash saving of $500,000, Uncle Sam now only require a 50% loan from the bank. TDSR no longer applies for him. He’ll be able to purchase the $1mil property for investment.

He can also take it further with the new changes.

He’ll be able to remortgage his existing fully paid property for an 50% mortgage equity loan, giving him $1 mil in cash.

The $1mil cash would enable him to invest in 2 x $1 mil properties by paying 50% cash and taking a 50% mortgage equity loans.

His saving of $500,000 would be left untouched for a rainy day.

Result : Uncle Sam can now invest in local property. In the same financial situation, he would now be able to own 3 local property with market value double his current holding.

Note: Yes, Uncle Sam can use his saving of $500k to invest in another property if he want to. He’s just playing it on the safe side to have some cash savings.



Disclaimer : Any investment in residential property – like all investments – carries with it a number of risks. If these risks eventuate, your income might be lower than expected – at times there may be no income. In life, there are no guarantees – there are also no guarantees that the capital value of your investment will increase; in fact it could fall.
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