New rules on mortgage lending hit variable income earners
New mortgage lending rules restrict those reliant on commission, bonus
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.
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