ST : Home buyers must prove sale to get higher loan

Sep 2, 2010

Home buyers must prove sale to get higher loan

By Jessica Cheam

HOME owners wanting to move and hoping for an 80 per cent loan on a new property will now have to produce evidence that they have sold their existing home.

The proof must come in the form of a signed sale and purchase agreement and a certificate showing that the buyer of their current property has already paid the stamp duty for the deal, said the Monetary Authority of Singapore (MAS) yesterday.

The Government unveiled on Monday a range of measures designed to dampen property speculation, including tighter lending rules for home owners with existing mortgages looking to buy another property.

They will now have to fund a 30 per cent downpayment for the new property, up from 20 per cent previously, and can borrow up to only 70 per cent of the value, down from 80 per cent.

The moves prompted questions from many home owners unsure whether they would qualify for 80 per cent financing if they intended to sell their existing property - or were in the process of doing so - and move into a new one.

The MAS clarified yesterday that borrowers who have sold their existing homes, but are still in the process of completing the sale, will still qualify for an 80 per cent loan provided they have supporting evidence of the sale.

For private property, this includes a signed sale and purchase agreement and a certificate from the Inland Revenue Authority of Singapore (Iras) showing that stamp duty has been paid by the buyer of the existing home.

For HDB flats, the MAS requires an approval letter from the Housing Board to the seller within two weeks from the date of the first sales appointment.

The home owner should also provide additional information, such as a letter from the bank providing the current housing loan, stating that the borrower will discharge his outstanding loan by the time the property sale is completed.

Industry analysts predicted yesterday that the stricter lending rules will mean lengthier negotiations between buyers and sellers.

PropNex chief executive Mohamed Ismail said that while it usually takes about 12 weeks for a sale to be completed, sellers may now negotiate for 14 to 16 weeks.

'This gives them time to look for a new home, get a loan and move out of their property,' he said.

HDB home owners are required to move out of their existing home upon completion of its sale, usually eight weeks after the first sales appointment.

But sellers may negotiate mutual agreements with buyers that allow them to stay beyond the sale completion date as a condition for selling the flat, said a 40-year-old property agent who declined to be named.

Banks that The Straits Times spoke to yesterday said they had been sent a new set of home loan rules by the MAS.

A circular issued on Tuesday by the MAS stipulated that banks had to 'conduct comprehensive checks' on borrowers with credit bureaus and the HDB.

OCBC Bank head of consumer secured lending Phang Lah Hwa confirmed that the bank could offer 80 per cent financing 'to genuine home buyers who have sold their existing homes... provided these customers can show evidence of the sale of the existing property at the point of loan application'.

Home owner Ming Fang Goh, 30, who is looking for an investment property, has mixed feelings about the new rules, but thinks they could be a 'blessing in disguise'.

'If the cooling measures help to bring prices down by 10 per cent, then even with a 30 per cent downpayment, some investment homes could become more affordable.'


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Supporting documents

WHAT home owners need to have to qualify for an 80per cent loan if they already have an outstanding loan:

· For private property, the supporting documents must include the signed sale and purchase agreement indicating the borrower has sold his existing property, and a certificate from the Inland Revenue Authority of Singapore showing stamp duty has been paid by the person who bought the existing property from the borrower.



· For HDB flats, the supporting documents must include the approval letter from the HDB to the seller within two weeks from the date of the First Appointment.

The borrower should also provide supplementary information, such as a document from the financial institution that provided the outstanding housing loan, stating the outstanding loan will be discharged on that existing property by the completion of the property sale.

Source: MAS