FAQ on deferring principal, interest payments on home loans

People with difficulty paying their mortgage can get help in deferring payments of principal and interest. ST PHOTO: KUA CHEE SIONG

People who have difficulty paying their mortgage can get help in deferring payment of principal and interest up to Dec 31 this year.

The scheme covers purchase loans and mortgage equity withdrawal loans, including debt reduction plans, for owner-occupied property as well as investment residential properties.

Borrowers with mortgage repayments that are no more than 90 days past due as of April 6 can opt in for the scheme without needing to show any financial impact from the coronavirus crisis.

If they choose to defer both principal and interest payments, interest will accrue only on the deferred principal amount. No interest-on-interest will be charged during this deferment period.

They can also choose to extend the loan tenure by up to the corresponding deferment period.

But the Monetary Authority of Singapore warned: "You should keep in mind that deferring payments and extending your tenure mean that you will be paying more interest in total. Therefore, it is better not to defer repayments if you do not need to."

The deferment will not cause the loan to be reflected as a restructured loan in the borrower's credit bureau report.

If borrowers are still unable to resume regular repayments after the deferment period, they should speak with lenders early to discuss suitable repayment plans or debt restructuring before the end of the deferment period.


Q Why is the interest on my principal amount not waived during the deferment period?

A Interest will accrue as the banks and finance companies continue to bear the risks of lending. However, if you choose to defer the full monthly instalment, interest-on-interest will be waived during the deferment period.

Q Will my mortgage automatically get a repayment deferment?

A Repayment deferments are not automatic as they will incur higher total interest costs and not everyone needs them. Apply to your bank if you need a mortgage repayment deferment.

Q What are the costs of taking up a repayment deferment?

A The total interest cost of the mortgage will be higher if you take up the repayment deferment. Your bank will provide you with an illustration of the instalments during and after the deferment period, and the estimated increase in total interest cost.

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A version of this article appeared in the print edition of The Sunday Times on April 19, 2020, with the headline FAQ on deferring principal, interest payments on home loans. Subscribe