RES exam question on Financing: A Singapore Citizen who already owns one property with an outstanding housing loan buys…
A Singapore Citizen who already owns one property with an outstanding housing loan buys a $2,000,000 condo as his second property, taking his first loan with a new bank. Which is/are correct? (i) ABSD at 20% would be $400,000 (ii) The LTV limit on a second outstanding housing loan is lower than 75% (around 45%) (iii) A larger cash downpayment applies to the second loan (iv) He can still borrow 75% as it is his first loan with this bank
- A(i), (iii) and (iv) only
- B(ii), (iii) and (iv) only
- C(i), (ii) and (iii) only
- D(i), (ii), (iii) and (iv)
Show answer & explanation
Answer
C. (i), (ii) and (iii) only
Explanation
ABSD for a Singapore Citizen's second residential property is 20% (IRAS, rates from 27 Apr 2023), so 20% x $2,000,000 = $400,000. With one housing loan already outstanding, the LTV limit on the new loan falls to 45% and at least 25% of the price must be paid in cash (MAS, LTV limits from 6 Jul 2018, for loan tenures within the standard limits).
Why the other options are wrong
- (iv) is the trap: the LTV limit depends on the number of outstanding housing loans, not on whether this is his first loan with this particular bank.
Study the concept behind this question: Property Financing in Singapore: LTV, TDSR & MSR
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