In this part 2 of a decoupling series, we will share the ways on mortgage decoupling. Previously, we looked at ownership decoupling. This article focuses on how you can decouple the loan when ownership decoupling is not available or feasible.
Your Borrowing Limits for New Purchase
There were so many cooling measures introduced in the past years. The current one took effect from 6 July 2018, which resulted in higher ABSD that pushed many to decouple property ownership, and lower borrowing limits which will be elaborated here.
It is important to understand the measures are very specific on borrowing of housing loans for new purchases of Singapore residential homes. The table below describes the latest rulings mandated by Monetary Authority of Singapore.
- Start by identifying if the borrower in an individual or company. If a person is buying the home, then the loan will be under the same individual.
- Next, count the number of Singapore residential housing loan you have currently. An outstanding HDB loan borrowed from Housing Development Board of Singapore is considered one (1) Singapore residential housing loan. If you intend to buy another property and you are a borrower of the HDB mortgage, then you are deemed to be taking a 2nd Singapore residential housing loan.
- Then look across for the 2 options available. You can borrow up to 75%, capped at age 65 and minimally 5% of the 25% downpayment must be cash. Otherwise if you are in a position to borrow lesser, you may consider up to 55%, which allows the tenure of the loan up to age 75 and min 10% of downpayment must be cash. Do note there’s also a tenure limit. For a person age 50 and intend to borrow only 44%, the longest tenure is 25 years (75-50) and not 35 years which would have exceeded age 75 when the loan expires.
You would have noticed the measures on borrowing limits do not govern the borrowing for overseas homes or commercial properties. If you have an existing mortgage on a Australia property in Perth, your limits to borrow is not restricted. But if you have a mortgage on another Singapore residential property, this table applies to you.
The other sub-table is for borrower which is a non-individual and in most cases, referring to a company. At only 15% borrowing limit, very few people are considering it.
Table: Borrowing Limits on or after 6 July 2018
|If the borrower is an Individual, applying for the||Borrowing Limits, up to age 65 or 30 years whichever is lower||Borrowing Limits, up to age 75 or 35 years whichever is lower|
|1st Singapore residential housing loan||Borrow 75% max, and min 5% of downpayment must be cash||Borrow 55% max, and min 10% of downpayment must be cash|
|2nd Singapore residential housing loan||Borrow 45% max, and min 25% of downpayment must be cash||Borrow 25% max, and min 25% of downpayment must be cash|
|3rd Singapore residential housing loan||Borrow 35% max, and min 25% of downpayment must be cash||Borrow 15% max, and min 25% of downpayment must be cash|
|If the borrower is a non-Individual/ company, applying for||Borrowing Limits up to age 70-75|
|Any Singapore residential housing loan||Borrow 15%, and downpayment must be cash|
Borrowing limits are very specific on borrowing of housing loans for new purchases of Singapore residential homes.
Mortgage Decoupling – the game for the employed
Let’s say the current property is jointly owned and the mortgage is in both names. You may consider ownership decoupling as mentioned in part 1 of this series, or look at mortgage decoupling.
Mortgage decoupling means the mortgage is taken under one person while the property remains under joint ownership. This will free up the non-borrower from any Singapore residential housing loan and this person will qualify for the maximum borrowing terms of up to 75% for their next Singapore residential housing loan which will be considered as the first loan.
Under this borrowing structure, we help both customers to continue using their CPF for monthly repayments despite one of them is a non-borrower.
When Do You Choose Mortgage Decoupling?
You can choose to do this during the application of a new loan or refinancing. We will assess each individual’s borrowing capability according to the TDSR guidelines, and recommend the party to be the sole borrower, before matching your mortgage preferences to the right bank.
You may consider this too, instead of ownership decoupling because you are not comfortable with splitting the property or you do not wish to incur the high fees and stamp duty associated with it. To entirely avoid ABSD, you have to decouple the property ownership.
We can help with the decoupling process. It involves TDSR assessment, reviewing your future property needs, mortgage assessment and application for each party, conveyancing matters and the costs associated. You may also start with comparing the latest mortgage rates.