Total Debt Servicing Ratio (TDSR) - Gross Income

What is TDSR ?

Total Debt Servicing Ratio ( TDSR ) is a debt servicing measure that Bank/Financial Institution used to determine if the potential borrower is overly geared with debts.

How to compute TDSR?

Based on the newest measure, TDSR should not be more than 60%

Monthly Total Debt Obligations  
_________________________       <      60%

       Gross Monthly Income


Monthly Total Debt Obligation consist of:
1)  Existing Housing Loan Installment
2)  Car loan Installment
3)  Personal Loan Installment
4)  Overdraft Loan Repayment
5)  Credit card etc


Gross Monthly Income consist of:
1) Consistent Fixed salary
2) Bonus /commission (30% haircut)
3) Rental Income (30% haircut)
Tenancy period must be still left with at least 6 month from application date


Example:

Mr Tan , age 39  with a declared income 2013

Employment: $100k
Commission: $60k
Rental : $40k (more than 6 month validity)

Gross yearly income will be compute as:
$100k + ($60k X 70%) + ($40k X 70%)
= $100k + $42k + $28k
= $170k

Gross monthly income will be compute as:
$170k / 12 = $14,166

Based on the TDSR, Mr Tan commitment should not exceed

$14,166 X 60% = $8,499.60

Car Loan $2,500/mth
Personal Loan $890/mth

Mr Tan will only be left with $5,109.60

Stress Test

Newly Purchase Monthly Installment will be computed based on a standard rate of 3.5% (Introduce by MAS) for residential property to access customer debt repayment ability

Although Mr Tan might be paying only $4,000+per month , across the banking industry, Bank will use $5,106.36 to calculate on Mr Tan's debt repayment ability.

Assuming that Mr Tan do not have any other commitment, the maximum loan that he is able to obtain based on 80% loan will be $1.02mil*, 25 years loan tenor.

*Do take note that  there are some bank which take into consideration of credit card minimum payment as a commitment. The above example is compute purely based on his car and personal loan.

If you have any question unsolved, you can either get me via my Mobile at 9 1 7 6 7 9 7 0 or email me at den@housingmatters.com.sg or even drop a comment below :

Den Ng
Housing Matters
http://www.housingmatters.com.sg

Completed Property: Grab your fixed interest rate now before it goes up further

For those who are planning to finance or refinance your property, grab the chance to get low fixed rate now before it start hiking up.

Some banks have removed their fixed package while others increase quietly.

Do drop me a call/sms at 9176 7970 or email me at den@housingmatters.com.sg for a no obligation discussion.


Den Ng
Housing Matters
http://www.housingmatters.com.sg

Don't always get "Cheated" by "Good rates" offered!!

Based on the Proposal, which Bank is offering a better package if there isn't any special clauses involved?

Of course is Bank B!!

Bank A

Bank B

 But Wait!!!

For BUC property if the project complete within 2 year ( which is quite rare ) you are still bound to pay a Cancellation Fee of the undisbursed fund if you were to refinance!!

Bank A
1) Interest paid: $5390.65
2) Principal paid: $12,761.64
3) Principal at end of 2 years: $337,238.36

Bank B 
1) Interest paid: $5019.78
2) Principal paid: $12973.76
3) Principal at end of 2 years: $337,026.24

Difference?
1) Interest : $5390.65 - $5019.78 = $370.87
2) Principal: $12,761.64 - $12,973.76 = $212.12
3) Prinicipal at end of 2 years: $337,238.36 - $337,026.24 = $212.12

Total Difference: $370.87 + $212.12 + $212.12 = $795.11

If you reprice and get a Good rate with Bank B, Congrats!!! You are saving $795.11 but if you were  to switch a bank (as bank B is not giving a good reprice rate)

Cancellation fee involved:
$130,000 * 0.75% = $975

$975 - $795.11 = ($179.89)

So in Fact, Are you actually SAVING?

Wait!!! Normally Uncompleted Project will complete within 3 years...

 What's Bank A and B 3 years rates instead?

Bank A

Bank B

Bank A
1) Interest paid: $11,330.34
2) Principal paid: $27,636.43
3) Principal at end of 3 years: $622,369.57

Bank B 
1) Interest paid: $12,903.11
2) Principal paid: $27,009.91
3) Principal at end of 2 years: $622,990.09

Difference?
1) Interest : $11,330.34 - $12,903.11 = $1,572.77
2) Principal: $27,636,43 - $27,009.91 = $626.52
3) Prinicipal at end of 2 years: $622,369.57 - $622,990.09 = $620.52

Total Difference: $1,572.77 + $626.52 + $620.52 = $2819.81

Getting a Loan from Bank A will save you $2,819.81 after 3 years!!

 So which Bank you prefer now?

This illustration is not to show you how much you can save, but to show you that the attractive figure might not be cost saving in the end.

"Play with the numbers and don't let the number play you out :)"

If you have any question unsolved, you can either get me via my Mobile at 9 1 7 6 7 9 7 0 or email me at den@housingmatters.com.sg or even drop a comment below :

Den Ng
Housing Matters
http://www.housingmatters.com.sg

Clauses to Look out for when refinancing a newly TOP Property

There are a few clauses to look out for when refinancing a newly TOP Property.

1) Cancellation fee on the undisbursed amount
2) Legal Clawback ( Only Applicable for those who enjoy Legal Subsidy )

1) Cancellation Fee:
Do take note that after your project TOP , there is still  13% of your fund undisbursed until the "Expiry of the defects liability period ended. If you were to switch a bank right after the TOP , you are bound to a cancellation fee of either 0.75% or 1.5% depending on the contract you sign.

Ie:
Right after TOP
PP: $1mil
13% of $1mil is $130,000

Cancellation fee:
a) 0.75% of $130,000  = $975
b) 1.5% of $130,000   = $1,950

Banker always mention that they can give Free Conversion 3month upon TOP, but
1) Can anyone predict what will be the rate like in 2-3 years time?
2) Will the current bank be providing you a competitive rate?
3) Do you know ,if you missed the conversion 3month upon TOP, you will have to pay a fee for the conversion?


2) Legal Clawback:
Based on the older scheme , bank actually subsidize legal fee. If you were to enjoy the legal subsidy and refinance within 3 years , most bank will want you to pay back the Legal subsidy.


If you have any question unsolved, you can either get me via my Mobile at 9 1 7 6 7 9 7 0 or email me at den@housingmatters.com.sg or even drop a comment below :

Den Ng
Housing Matters
http://www.housingmatters.com.sg

Choose the Best Package for your Property

I have client who is planning to buy or refinance often confused with the various package offered by the bank.

Each Bank have their own specialty package just like each restaurant having their own "Signature dish". If you are planning to eat crab but the restaurant offer you crayfish , think twice before you commit to them coz it might not suit you...

Typically the packages are as follows:
1) SIBOR
2) SOR
3) Combo
4) Variable Rates
5) Fixed


SIBOR (Singapore InterBank Offered Rate) 

Sibor is a daily reference rate based on the interest rates at which bank offer to lend unsecured funds to each other in the Singapore wholesale money market.

Sibor come in terms of 1/3/6/12 months. Terms which Bank often offer are 1/3 month Sibor.

Highest 3M SIBOR was 7.75% which happened in Jan 1998
Lowest 3M SIBOR was 0.25% which happened in Sept 2001

Bank offering SIBOR:

BOC, CIMB, CITIBANK,  DBS , HSBC, MAYBANK, OCBC, SCB, UOB,

SIBOR is transparent and can be view daily via Business Time , Housing Matters and other web sources.



SOR (Swap Offer Rate)

SOR is the cost of borrowing SGD synthetically by borrowing USD for the same tenor and swapping out the USD in return of the SGD and normally implied from the USD/SGD forward prices.

SOR come in terms of 1/3/6/12 months. Term which Bank often offer is 3 month SOR

Bank Offering SOR:

ANZ, BOC

SOR is transparent and can be view daily via Business Time , Housing Matters and other web sources.



COMBO

Combo is the average of both 3 month Singapore Interbank Offered Rate (SIBOR) and Swap Offer Rate (SOR)

Bank offering Combo:
ANZ



Variable Rates:

Variable Rates are pegged to the Bank Internal Board Rate. It means that Bank can review the rates as and when they need to. This causes certain level of uncertainty to what borrower have to pay in the future. The Home Loan interest rate will be adjusted accordingly.

Ie
1st year: ABCMR - 4%
2nd year: ABCMR - 3.5%
3rd year: ABCMR - 2.5%
Current ABC_Mortgage Rate (ABCMR) is 5.00%

You will be paying:

1st year : 1% (floating)
2nd year: 1.5% (floating)
3rd year: 2.5%(floating)

When ABC bank changes their ABC_Mortgage Rate (ABCMR) to 6 %,

You will be paying:

1st year : 2% (floating)
2nd year: 2.5% (floating)
3rd year: 3.5%(floating)

Bankers may often say that their Board Rate have not been changing for the past years but do bear in mind that Variable rates are not Transparent and is subjected to review as and when the Bank needs to.

Bank offering Variable Rates:
CIMB, MAYBANK, OCBC, RHB, UOB




Fixed:

Bank will normally offer client fixed package from 1 year to 5 years. Fixed rates is normally higher than the rest of the package (SIBOR, SOR, Variable, Combo) .Typically the longer the fixed period the higher the interest rate as the bank will have to bear the risk of interest rate going up.

Fixed package are normally meant for Completed Property.

Bank offering Fixed rate:

BOC, CITIBANK,  DBS , MAYBANK, OCBC, RHB, SCB, UOB,


If you have any question unsolved, you can either get me via my Mobile at 9 1 7 6 7 9 7 0 or email me at den@housingmatters.com.sg or even drop a comment below :

Den Ng
Housing Matters
http://www.housingmatters.com.sg

Comparing Uncompleted Property Rates

Different bank have different ways to attract customer to take up their loan. In terms of the rates below, most of the client will think that Bank B offers a better package, but in actual fact Bank A is offering a better package for an uncompleted project.

                 Bank A                                                                            Bank B
   1st year: 3mth Sibor + 0.90%                                     1st year: 3mth Sibor + 0.85%
   2nd year: 3mth Sibor + 0.90%                                    2nd year: 3mth Sibor + 0.85%
   3rd year: 3mth Sibor + 0.90%                                     3rd year: 3mth Sibor + 0.85%
   4th year: 3mth Sibor + 1.00%                                     Thereafter: 3mth Sibor + 1.25%
   Thereafter: 3mth Sibor + 1.25%

                       Bank A                                                             Bank B

Total Interest
Paid :              $21,446.61                                                     $22,740.18  
Principle at End
of 4th year :   $750,797.49                                                   $751,787.79

Total Interest Saving: $21,446.61 -  $22,740.18 = $1,293.57
Total Principle Saving:  $750,797.49 - $751,787.79 = $990.30

Total Saving : $1,293.57 + $990.30 = $2,283.87

This illustration is not to show you how much you can save, but to show you that the attractive figure might not be cost saving in the end.

"Play with the numbers and don't let the number play you out :)"

*Do take note that for uncompleted project, full fund will only be disbursed  1 year after TOP, any refinancing or full payment done on TOP will be subjected to a cancellation fee.


If you have any question unsolved, you can either get me via my Mobile at 9 1 7 6 7 9 7 0 or email me at den@housingmatters.com.sg or even drop a comment below :

Den Ng
Housing Matters
http://www.housingmatters.com.sg

Is Your Mortgage Loan More than 3 Years?