RES exam question on Financing: Mr Tan, 40, earns a fixed $9,000 a month and his wife, 30, a fixed $3,000
Mr Tan, 40, earns a fixed $9,000 a month and his wife, 30, a fixed $3,000. They are buying a condominium jointly with a bank loan, and Mr Tan's brother has offered to stand as guarantor. Their salesperson explains how MAS's rules treat each of them. (i) Each of them named as a borrower on the loan must also be a mortgagor of the property. (ii) If the couple fail the TDSR threshold, the brother must join as a co-borrower rather than act only as guarantor. (iii) For the loan-tenure rules, the bank uses their simple average age of 35. (iv) TDSR is tested for each spouse separately, and each must be within 55% of his or her own income. Which of the statements above is/are correct?
- A(i), (ii) and (iii) only
- B(ii) and (iv) only
- C(i) and (ii) only
- D(i), (iii) and (iv) only
Show answer & explanation
Answer
C. (i) and (ii) only
Explanation
Answer: (i) and (ii) only. Every borrower must be a mortgagor and a guarantor must become a co-borrower if TDSR fails, but age is income-weighted and TDSR is tested jointly.(i) True. Borrowers named on a housing loan must be mortgagors of the property.(ii) True. Where a borrower fails the TDSR threshold, a guarantor must be brought in as a co-borrower.Working:1. (40 x $9,000 + 30 x $3,000) / $12,000 = 37.5, the income-weighted age.Rule: Every borrower must be a mortgagor, and a guarantor for a borrower who fails TDSR must become a co-borrower. Joint borrowers are assessed on income-weighted age and on combined income and debts.Source: MAS, Rules for New Housing Loans, mas.gov.sg, read 1 Oct 2026; MAS, TDSR at 55% since 16 Dec 2021
Why the other options are wrong
- (iii) False. Banks use the income-weighted average age, 37.5, not the simple average of 35.
- (iv) False. TDSR is assessed jointly, on the borrowers' combined income and combined debts.
Study the concept behind this question: Property Financing in Singapore: LTV, TDSR & MSR
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