See also
Delphia of OC is a mortgage specialist. She shared her personal observation that majority of Singapore borrowers (probably including non-PRs) would max out their borrowing capacity i.e. loan quantum.
One of the most important limits is TDSR. (For HDB units, another important limit is MSR.) No more than 55% (was 60) of income (including CPF) is allowed to be used for instalment. 55% of total income spent on debt servicing?! Sounds like dangerous (cashflow) low ground.
I asked her why the “majority” has such a motivation. Delphia said many want to maximize their investment i.e. grabbing the biggest property they can afford. OnePearlBank might be one example.
— interest rate sensitivity
Delphia herself felt buying at the current price level doesn’t sound like smart “investment“. However, such a strategy was considered a leveraged investment at a very low borrowing cost, though interest can skyrocket.
These “investors” believe that if they wait long enough, their leveraged investment would appreciate — sure-win.
When a lender calculates monthly instalment, a key input is the interest rate. A max-out borrower would want a rock-bottom rate like 0.1 ppa to minimize the projected instalment, but MAS uses 4 ppa known as the medium-term interest rate floor.
Wallace Xu said something similar about American home buyers… they are highly sensitive to rate hike.
— my preference for (net) current income and against windfall
I never like to bet against rate hike. I always maintain a war chest to wipe out my loans whenever LIR breaks my threshold. My own “exposure limit” is lower than MSR limit.
When you focus on current income, you will naturally become more careful with LIR cost.