New rules on mortgage lending hit variable income earners
New mortgage lending rules restrict those reliant on commission, bonus
Published on Jul 6, 2013 9:11 AM
THE new rules on mortgage lending could leave good earners like remisier Alan Goh out in the cold if they try to take on a bigger home loan.
Mr Goh relies entirely on commissions for his monthly income and, although he earns a comfortable living from stock market trading, he will face tighter restrictions on lending.
The new rules imposed by the Monetary Authority of Singapore (MAS) last Friday require banks to apply a 30 per cent discount to the annual variable income that borrowers earn. This includes bonuses, allowances, rents from investment properties - and commissions, which means Mr Goh is caught in the net.
A new total debt servicing ratio (TDSR) framework also states a borrower's monthly repayments on all loans, including any new mortgage, cannot exceed 60 per cent of his gross monthly income.
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Who will be affected
People likely to be hit by the new curbs:
- Variable income earners like property agents, insurance agents and the self-employed
- Borrowers relying on rental income to finance more property purchases
- High-earning executives in listed firms with variable income like bonuses that could comprise up to 80 per cent of their pay