The latest ruling in December 2013 is the adoption of the Mortgage Service Ratio (MSR) for purpose of calculating the housing loan amount to be granted for Executive Condominum (EC) by banks.

 

With this change, housing loans granted for purchase of resale HDB flats, Build-to-Order (BTO) flats as well as EC are required to meet both the MSR and TDSR calculations.  Previously, the housing loan granted for EC was based on the TDSR calculation only.

To recap, MSR caps the monthly payment towards the housing loan to 30% of monthly income whilst TDSR caps the monthly payment towards the housing loan together with all other monthly payments towards other loans to 60% of monthly income.

 

Under the MSR calculation, an EC costing about $1M will require a monthly income of at least $11,977 or about $12K to qualify for a loan of $800K (80% of $1M) over a loan period of 30 years, compared to income of $5,988 or $6K under the previous regulation, translating into a 50% increase in income. This is assuming the housing loan is the only outstanding loan with no other debt commitments.

 

Existing ECs, which were bought prior to the implementation of MSR calculation, will also be subjected to the same MSR calculation. Exceptions are allowed if certain conditions are met, including property under finance is the only property that the owner owns and the property is owner occupied.