The following information is important with regards to the rules that you will need to follow when purchasing properties.
This is the Total Debt Servicing ratio and it is a rule enforced by the Monetary Authority of Singapore. It is a guideline that has to be legally followed by a lender. They are not allowed to lend to an individual if they have any debt repayments which are more than 60% of his gross income. The 60% is to include the new loan that would be taken on to purchase the property. The figures of the new loan are calculated using the highest figure between the actual interest rate or 3.5%. This 60% of gross income threshold also applies to guarantors of a loan as well as the borrower themselves.
Loan Tenure Limit
The Monetary Authority of Singapore has a time limit of loans which is a maximum of 35 years. If more than one person is taking out the loan, then both are taken into consideration by calculating an income weighted average. This means if one wants to borrow for longer than 35 years, then the other will have to borrow for less in order to weight the equation so that they can still borrow the money under the 35 year rule.
Loan to Value Limits
This is a limit on how much money can be borrowed from the bank. It is a percentage of either the purchase price (as agreed by seller and buyer) or valuation price given by the bank. The lowest of the two figures is used.
The percentage you are allowed will depend on a number of factors. You can borrow 80% if you have no other outstanding loans. However a foreigner without PR status may find they have a 60% or 70% cap. You can borrow 50% if you have one outstanding loan. You can borrow 40% if you have more loans or buying under a company.
However if you have a loan term for more than 30 years or the loan period takes you beyond retirement age then the percentages are lower. They are 60% if you have no other outstanding loan, 30% if you have one other loan and only 20% if you have two or more loans or are buying under a business.
The borrower must be the property purchaser, no one else can borrow on their behalf.
Minimum Cash Down Payment
The money that cannot be borrowed from the bank must be paid in cash or come form a savings account. There is a minimum amount of the lowest or either the valuation or purchase price that must be paid in cash. This is 5% for a LTV of 80%, 10% for an LTV of 60% and 25% cash in all other cases.
Additional Buyer Stamp Duty
A stamp duty tax has to be paid by anyone buying a property in Singapore. It is roughly 3% of highest from the valuation or purchase price. However, there is also an additional stamp duty tax, which is variable depending on your status.
A Singapore Citizen does not pay it on their first property purchase but pays 7% on their second property and 10% on their third. A Singapore Permanent Resident pays 5% on their first property purchased and 10% on the second. A foreigner or someone buying under a company pays 15% on all properties purchased.
If more than one person is buying a property then the highest applicable Additional Buyer Stamp Duty will be charged.
Seller Stamp Duty
Sellers have to pay stamp duty which is a percentage of the highest form the selling price or valuation price. This is to stop property changing hands very quickly. If you property was bought between 30/8/2010 and 13/01/2011 then the rate was about 1%. However after 14/01/2011 the rates vary.
If you sell less than a year after purchase you pay 16%, between one and two years after purchase you pay 12%, between two and three years after purchase you pay 8% and between three and four years after purchase you pay 4%.
Restrictions for Public Housing
If the housing is sponsored by the government (HDB flats) then there are additional restrictions on it.
The mortgage servicing ration is capped at 30% if the loan is granted by a private intuition like a bank and at 35% if it is granted by the HDB. Permenant residents cannot rent out their entire unit and they must sell their HDB flat within six months if they purchase a private residential property in Singapore.
Exemptions and Reliefs
If you own a residential property in Singapore then you do not have to stick to these limits in some circumstances. These are if you purchase an executive condominium from a property developer directly or a HDB flat (but you would have to dispose of your previous flat).
If you are a citizen of USA, Switzerland, Iceland, Norway or Liechtenstein you do not have to pay the ABSD for foreigners but can pay the same rates as Singapore citizens.
If you are a married couple and one of the pair is a Singapore citizen you may not have to pay the ABSD. This will apply if neither owns a property already and if any existing properties owned by the couples are disposed of within six months of the new property being bought.