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Total Debt Servicing Ratio Implications

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The Monetary Authority of Singapore (MAS) introduced the Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions (FIs), with effect from 29 June 2013.

In for the kill

Computations of the TDSR affects properties that are residential or non-residential, individuals’ or companies’, new applications or re-financed loans, and in or outside Singapore. Declaration and calculation of incomes and loans are also down to the last detail.

TDSR may be a new term, with explanations in the FAQs of the TDSR unnecessarily long and difficult to read. But they are only additional sub-clauses to address the loopholes of the Loan-to-Value (LTV) limits announced in the previous property cooling measures.

It is also nothing new to see the government once again adopting a “reactive intervention” approach – dispatch general guidelines to the market, then await speculators to circumvent the loopholes, before sending more stringent rules in for the kill.

What are the killers?

There are four major “killers” in the TDSR framework:

1) 60% threshold

Total debt obligations cannot exceed 60% of total income.

2) 30% haircut

There is an arbitrary 30% cut of all variable and rental income, and 30% to 70% cut for the value of eligible financial assets.

3) 3.5 or 4.5% interest rate

Calculate new loan repayments based on medium-term interest rate of 3.5% for residential properties and 4.5% for non-residential properties, or prevailing interest rate, whichever is higher.

4) Income-weighted average age

If borrower can’t meet the TSDR threshold, the guarantor will be the co-borrower.

Use income-weighted average age of borrowers rather than younger borrower’s age to determine loan tenure.

Who are the targets?

It is clear that the TDSR is meant to target specifically three main groups of property buyers:

1) Marginal Buyers

- Buyers who are highly leveraged with property or non-property debts

- Buyers’ affordability depends on low interest rate and betting that it won’t go up too fast too soon

2) Multiple Property Buyers

- Buyers who are buying their second, third or more properties with high outstanding loans

- Buyers who bought properties recently at high price, with low, zero or negative rental return

Note: Once interest rates go up, owners of multiple properties may not be able to refinance or repackage to lower monthly repayment even for the loan of their own residence if they exceed the TDSR threshold.

3) Two generation buyers

- Buyers hoping to benefit from a longer loan tenure by putting the loan under a younger joint applicant’s name

- Multiple property buyers hoping to benefit from higher LTV with a joint applicant buying for the first time

Message to parents: it’s time we stopped loaning loans on the next generation.

Work that kills

1) Bonus or commission-based jobs

With a 30% cut on variable income, salarymen relying heavily on bonus or commission will be at a disadvantage, for instance, salespeople who have the majority or all of their income based on commissions, or senior executives who have a high proportion of their income based on bonuses.

2) Self-employed, unemployed and retirees

They have to declare all their eligible liquid assets or other assets, amortize the value over 4 years, and decide whether they will be pledged or not for 4 years.

3) Staff in mortgage department

FIs are required to compute the borrowers’ TDSR with a mountain of information:

- monthly repayments of all property and non-property debt obligations;

- gross, variable and rental income after haircut; and

- eligible assets declared with or without pledge.

And all declarations and supporting documents have to be obtained from applicants and validated with relevant parties.

Deviations are not allowed since all exceptions have to be granted by the FI’s board of directors and credit committee.

The 60% threshold is just a start to get FIs familiarize with the computation of TDSR. The LTV limits are also not permanent. They are to be reviewed over time and revised at any time. That means all calculations are only temporary and may be required to redo all over again.

Imagine the tremendous amount of extra workload added on the housing mortgage department!

4) Housing loan applicants

Before the TDSR rule, housing loan applicants normally take one week to obtain an approval-in-principal. With the new computation of TDSR, housing loan application is now a long and tedious process.

It is a toil to submit details and proofs for all property and non-property debt obligations, variable income and eligible financial assets.

Should owners ask tenants to renew their lease well in advance to ensure that the tenancy agreement has a remaining rental period of at least six months?

Should non-property debt loans include, apart from car loans, renovation loans, student loans and credit card loans, all other purchases paid by installments like electrical appliances, overseas holidays, spa and beauty packages?

Going through all these hassles is the last straw that kills!


Courtesy of Property Soul, original post here

Meet Auntie Doris, your friendly Automoneyback Customer Service Officer

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Meet Auntie Doris, your friendly Automoneyback Customer Service Officer.

At Automoneyback, we remind our drivers & members of your Car Insurance, details, and collect  up to 10 quotes for you to select from, before helping you to process them yearly. On top of which, you get rewarded too, for using Automoneyback Car Insurance Quote Service.

We know our drivers are busy, and frequently get bombarded by calls – Auntie Doris is our friendly Officer who will verify your renewal particulars in a motherly tone, and we like to do our part for nation building in keeping our seniors meaningfully employed too.

Please visit our website at to get your car insurance instant quotes, and yearly friendly reminders from Auntie Doris.

Also, if you know of more “Auntie Doris’ ” who would like to be a part of the Automoneyback team, please do let us know, and share with your friends and Like Us on Facebook, or follow us on Twitter now!

Auntie Doris, Automoneyback Auntie Doris, Automoneyback


AutoMoneyBack gets $250k fund, Straits Times 2nd August 2012

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A group of private investors last month invested $250,000 in AutoMoneyBack.

The firm offers car and homeowners the chance to buy insurance, loans and other services from one website. Car hunters can use it to compare loans and insurance plans.

AutoMoneyBack co-founder Chua Teck Hiong says the new funds will be used for a new office in Tampines, to hire two marketing executives and to pay for advertisements.

The site’s most innovative feature is helping users negotiate for a better price and freebies if two or more people want to buy the same model of a car. But this group buying feature takes about a month to close the deal.

AutoMoneyBack, which offers group buying for cars, gets US$200,000 in seed funding

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AutoMoneyBack, a website that offers a range of services for car and home buyers, closed a seed funding of S$250,000 (US$200,000) from a group of private investors last month.

The startup also relaunched their services this year and publicized it through an outdoor campaign involving taxis. They plan to use the funds to expand their operations and engage in more marketing activities.

AutoMoneyBack essentially serves as a one-stop destination for a variety of loans and insurance products for vehicles and homes. They also have assistance schemes designed to help aspiring car owners make the right purchasing decisions and existing car owners to sell their vehicles.

For customers who would like to buy their car at a deep discount and don’t mind waiting, the website offers a group buying program.

It doesn’t work like Groupon however — one does not simply buy a voucher and redeem it at a car shop. Instead, after prospective buyers indicate the make of the vehicle they want, AutoMoneyBack will group them with other aspiring owners and process the documentation needed to get the discount.

The whole process could take a month, since forming groups take time. There’s also a need to wait for the next COE bidding exercise.  As a general rule, steeper discounts can be sought if there’s more people in a group and if the car is more expensive.

Finally, customers can use a rewards program when making purchases on the site. The points can be redeemed for gift vouchers.

The company is founded by Chua Teck Hiong, who is also a consultant for computing solutions startup Progeniq and its former VP for business development, together with Adrian Ang, an insurance agent with 13 years of experience.


First published by by Terence LEE.

Property – To buy or not to buy

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A reader who had a friend in her 30s shared this true story with us, and we thought you might be able to relate.

Hubby asked me what I’d like to have for my coming birthday.

In the past year I haven’t got anything for my birthday, Christmas and wedding anniversary. With pregnancy and a newborn, we were too occupied to shop for presents.

“Just go and get anything nice,” he said.

Then he suddenly recalled,

“Do you need to upgrade your car? The latest model of your dream car is in town now. Did you see the launch ads?”

I know. I’ve been reading about it since its conceptualization in Europe. They’re finally here!

“Why don’t you go for a test drive and pick the color first? I’ll get it for your birthday.”

That’s very sweet! I know hubby is eyeing for a new car too. But the high COE makes him put the purchase on hold.

That evening we were at a suburb shopping mall.

We decided to have dinner at a Japanese restaurant because the a-la-carte buffet was available at a good discount off the weekend prices.

After dinner, we went to buy some kitchen and bathroom accessories. We managed to bargain for a discount from the original price.

We got our daughter a dress from a good brand. It was sold at half price!

Then we headed for a bread shop to enjoy the 20 percent discount for purchase after 8.30 p.m.

We also got a cup of fresh juice from the next shop where the staff were clearing them at $1 before closing.

As we left the mall, I noticed that we enjoyed free parking during our stay.

We had a good laugh at the fact that we were too stingy to pay the original price for everything we bought or consumed that evening.

And suddenly, I realized that I made money from properties the same way by NOT buying them when they were first marketed at list prices.

I bought my 3rd property at $525,000 from the seller who got at it new at close to $800,000.

The previous owner of our residence purchased the house during its TOP at $1.2 million while we bought it from him at $735,000.

If only they could wait for just a few years to buy …

When developers are selling properties at premium future prices during the launch, why do buyers still rush there to get these overpriced new units?

My friend’s well-to-do grandpa once shared his shopping tips,

“All things are sold at their highest when they are new in the market. If you have the patience to wait, you can see their true value later.”

That night before we went to bed, I told hubby that I didn’t want the new car any more.

Just upgrade my mobile phone. And no need to buy the latest model.

I’m a pragmatic person who loves bargains and so does he. Above all, I don’t want him to look foolish when prices drop next time.

Let’s wait for the right time to buy.