Home loan curbs 'will hit older buyers'

Home loan curbs 'will hit older buyers'

Investors in a weak financial position and buyers in their 40s and 50s will feel the effects of the latest property rules most acutely, analysts say.

The changes, unveiled by the Monetary Authority of Singapore last Friday, are similar, in effect, to higher interest rates, they said.

Some older buyers who already have a loan may abandon plans to buy an investment property, the analysts added.

The central bank set a maximum of 35 years on all home loans. For new loans, the loan-to-value ratio has been lowered if the loan exceeds 30 years, or if the loan period extends beyond the retirement age of 65.
Older buyers will be forced to take shorter loans if they do not wish to pay a larger amount upfront. In some cases, the monthly rental received from these properties may not even be sufficient to cover their monthly mortgage.

For instance, a 50-year-old investor will now be able to get a maximum loan term of only 15 years if he wants to avoid the stricter loan-to-valuation limits.

This means that if he buys a three-bedder at Sunville in the Serangoon area for $1.2million, his monthly repayment on a 15-year loan will be $4,367 (assuming he has another loan). Previously, assuming he met the bank's credit assessment criteria, he could have taken a 25-year loan with a monthly mortgage of only $2,773. The rent for such a unit would be about $3,800.

Source: The Straits Times – 9 October 2012