Lecture 5 - Housing Loan

Question 1

What is a floating rate package?

Answer 1

• The margin rate is agreed upon contractual acceptance

- Interest is computed using a veriable base rate such as SIBOR or SOR plus the contracted margin

Question 2

What is a fixed rate package?

Answer 2

• The fixed interest rate is agreed upon contractual acceptance
• Monthly repayment amount is constant during the year that the fixed rate is being applied

Question 3

What is the difference between floating rate package and fixed rate package?

Answer 3

The interest rate used, floating uses a variable rate such as SIBOR or SOR while fixed uses a fixed rate that allows constant repayment (????? Check again)

Question 4

Name the 4 types of MAS Notice 632 LTV for loans

Answer 4

1. <=30 tenure, <=65 sum of tenure + age, no outstanding loan (75%, 5%)
2. > 30 tenure, >65 sum of tenure + age, no outstanding loan (55%, 10%)
3. <=30 tenure, <=65 sum of tenure + age, one outstanding loan (45%, 25%)
4. > 30 tenure, >65 sum of tenure + age, one outstanding loan (25%, 25%)

Question 5

What is the TDSR formula?

Answer 5

total monthly gross income

P.S. remember the haircut!

Question 6

What is the difference between TDSR vs LTV?

Answer 6

TDSR is a useful additional —macroprudential— tool to complement the existing LTV limits for property purchases as it takes a more holistic account for the debt obligations of the borrower.

While the LTV helps to control the loss exposure of FIs if a borrower defaults, the TDSR serves to calibrate the size of the loan to the borrower’s repayment ability.

Question 7

What are the 3 prohibitions in MAS Notice 632?

Answer 7

1. Prohibition of interest-only loans
2. Prohibition of interest absorption scheme
3. Purchaser contribution