RES exam question on Financing: A buyer funds a private condominium with a bank loan and CPF
Case study — A buyer funds a private condominium with a bank loan and CPF. He has other monthly debt obligations. He wants to know his limits. Evaluate the statements: (i) The loan-to-value (LTV) cap limits the loan as a percentage of price/valuation (ii) CPF may fund part of the balance, subject to CPF rules (iii) TDSR governs how much he can borrow against his income (iv) The buyer can borrow 100% of the price with no limits Which statements are CORRECT?
- A(ii), (iii) and (iv) only
- B(i), (ii) and (iii) only
- C(i), (iii) and (iv) only
- D(i), (ii), (iii) and (iv)
Show answer & explanation
Answer
B. (i), (ii) and (iii) only
Explanation
(i) is correct: the LTV cap limits the loan as a percentage of price or valuation. (ii) is correct: CPF may fund part of the balance, subject to CPF rules. (iii) is correct: TDSR limits how much he can borrow against his income given his other debts.
Why the other options are wrong
- (iv) is wrong: he cannot borrow 100% with no limits; LTV and TDSR constrain the loan, so the answer is (i), (ii) and (iii) only.
Study the concept behind this question: Property Financing in Singapore: LTV, TDSR & MSR
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