MAS is proposing some additional measures with regards to the Loan-to-Value (LTV) limits for property loans.
As we all know, the government has recently announced the limit of 60% LTV for 2nd residential mortgage loans for individuals and 50% for companies.
Financial institutions also grant loans to borrowers that are not for the purchase of, but are nevertheless secured on, residential property. These loans include mortgage equity withdrawal loans (MWLs), which are loans secured on the borrower’s equity in a residential property. MAS plans to require FIs to comply with an LTV limit on MWLs, and to aggregate loans from moneylenders used to pay for residential property purchases, for LTV computation.
The aggregation of loans would plug a loophole whereby individuals can use unsecured credit to pay for the cash deposit of a property purchase.
The consultation paper can be viewed here:
Comments can be sent via email to [email protected] by 14th February 2011.