RES exam question on Financing: MAS's rules
Mr Tan, 40, earns $9,000 a month. His wife, 30, earns $3,000. Both are fixed salaries. They are buying a condominium jointly with a bank loan, and Mr Tan's brother offers to stand as guarantor. Under MAS's rules, which is/are correct? (i) Each borrower named on the loan must also be a mortgagor of the property. (ii) If the couple fail the TDSR threshold, the brother must be brought in as a co-borrower rather than act only as guarantor. (iii) For the loan-tenure rules, the bank uses an income-weighted average age of 37.5. (iv) TDSR is tested separately for each spouse, and each must be within 55% on his or her own income.
- A(i), (ii) and (iii) only
- B(i) and (iii) only
- C(ii), (iii) and (iv) only
- D(i), (ii), (iii) and (iv)
Show answer & explanation
Answer
A. (i), (ii) and (iii) only
Explanation
MAS's TDSR framework (media release of 28 Jun 2013, effective 29 Jun 2013) tightened how LTV rules are applied. Borrowers named on a housing loan must be mortgagors of the property. A guarantor for a borrower who fails the TDSR threshold must be brought in as a co-borrower. For joint borrowers, banks apply the loan-tenure rules using the income-weighted average age, based on gross monthly income. Here that is 40 × 9/12 + 30 × 3/12 = 37.5. MAS computes TDSR for a joint application on the borrowers' combined debt obligations and combined gross monthly income, against the 55% threshold that applies to Options granted from 16 Dec 2021. That rules out every combination that includes it, and the two-statement option leaves out the guarantor rule.
Why the other options are wrong
- The statement on separate testing is wrong.
Study the concept behind this question: Property Financing in Singapore: LTV, TDSR & MSR
Practise more Property Finance & Financial Calculations questions
Drill the full Property Finance & Financial Calculations bank with instant answers and explanations — free to start, no card needed.
Related Property Finance & Financial Calculations questions
- RES exam question on Financing: Daniel and Serene are married Singapore Citizens, both aged 44
- RES exam question on Financing: A borrower's loan is stress-tested and capped by several rules
- RES exam question on Financing: A Singapore Citizen considers refinancing the mortgage on the private condominium he…
Get each day's lesson free — one RES topic + the trap, every day on Telegram.
Join @resprepsg →Original study material mapped to the public CEA RES syllabus. Verify any rate-based figures against current IRAS/CPF/MAS rules before relying on them.