On 31st March 2020, Monetary Authority of Singapore (MAS) introduced a relief measure (as part of the relief package and in collaboration with the local finance companies) to help borrowers ease their financial burden in their loan repayments. Under the deferment of repayment for residential property loans, borrowers can either defer repayment of either (1) the principal, or (2) both the principal and interests up to 31st December 2020. A few months later, on 5th October 2020, MAS offered another repayment plan which is pegged at 60% of the borrower’s monthly instalment.
Loan Deferment of Residential Property Loan
Who is eligible?
Individuals will be eligible for the residential loan deferment, be it a mortgage equity withdrawal loan or housing loan, as long as the monthly instalments are not overdue by more than 90 days as at 6th April 2020. Applicants do not have to show that they have been financially impacted by the pandemic in any way.
What are the two types of deferment? Deferment on principal payment Under this deferment, the principal will be waived but monthly interest has to be paid.
Deferment on principal + interest This deferment will continue to incur an interest on the principal amount, but not on the interest. Simply put, there will be no interest-on-interest during the loan deferment period. After 31st December, the total loan amount inclusive of interest will be distributed over the remaining loan tenure.
What happens after the loan deferment period?
Borrowers can choose to extend the loan tenure of the mortgage by the duration of deferment period. By doing so, the borrower’s monthly loan repayment amount will be lowered. This will not be shown as a restructured loan in the credit report.
What to take note of before applying for the loan deferment
By applying for a mortgage loan deferment, the total amount paid will be higher compared to not taking up a deferment. Before the loan deferment is approved, the financial institute will provide the individual with an illustration of the monthly repayment amount during and after the deferment period, as well as the estimated total interest cost. As such, it is not recommended to apply for the loan deferment unless required.
Reduced Instalment Repayment Plan
Who is eligible?
This opt-in plan is only for borrowers who are financially impacted by the pandemic, with at least 25% loss in income or loss of employment after 1st February 2020. Mortgage repayments should not be overdue by more than 90 days. Note: application closes on 30th June 2021.
What is the loan deferment amount and period?
The loan deferment will be pegged at 60% of the borrower’s monthly instalment, covering both interest and partial principal payments. It will start from the date of application approval and ends 9 months later, or on 31st December, whichever is later.
What to take note of before opting in for the reduced instalment plan?
Similar to the mortgage loan deferment, the total mortgage cost will be higher than not opting in for the plan. Financial institutes will also provide an illustration of the monthly instalment amount during and after the period, as well as the additional costs incurred.
If you are unsure if you should go forward with either of the two reliefs, be sure to have a chat with the bank or consult a mortgage specialist.