Bank eases rules on home mortgages

Taipei--The Land Bank of Taiwan, one of the largest home loan providers in the country, said Wednesday that it has eased its rules on extending mortgages to home buyers.

According to the bank, the new rules, which became effective this month, allow a home mortgage seeker who has NT$600,000 (US$19,672) or higher in annual income to borrow a home loan accounting for 80 percent of the home value.

Before the new rules, the minimum annual income for a home mortgage seeker for the same conditions was set by the bank at NT$800,000.

Consumers who want to buy a second home or more are also eligible to the eased mortgage rules, the bank said.

However, the bank said the debt-to-income ratio for a single home mortgage seeker who shoulders no other loans stays unchanged at 800 percent, while the ratio for a married couple seeking a home mortgage remains unchanged at 1,200 percent.

For instance, a home loan seeker who earns NT$600,000 per year could buy a home valued at NT$10 million, but the maximum mortgage for the new home would remain at NT$4.8 million instead of NT$8 million, in a bid to meet the debt-to-income ratio.

For a married couple whose combined income hits NT$1.2 million per year, the maximum home mortgage will total NT$14.40 million and the loan will meet the new loan rules, since the amount will make up 80 percent of a new home valued at NT$18 million.

Due to the debt-to-loan ratio restrictions, the bank said that the eased mortgage rules are expected to provide more help to home buyers in central and southern Taiwan, where home prices are relatively low.

Market analysts said that the move comes as speculation in the local property market has been on the decline since the government came up with a series of measures to rein in property prices.

Among the measures to curb speculation, the government launched a new property-related tax scheme that took effect on Jan. 1, 2016, which is a factor that has dragged down housing transactions in Taiwan for the year to a new low of 245,396 units.

The new tax scheme imposes a capital gains tax of up to 45 percent on people who sell second homes within a certain period of time from the date of purchase.

After consolidating for some time, however, the local property market has shown signs of stabilizing to some extent, as home buyers who seek residence for their own use have returned to the market.

In June, transactions of residential and commercial property in the six major municipalities hit 20,351 units, up 16 percent from May, when sales grew another 16 percent month-on-month.

Transactions of homes, offices and shops in the six municipalities -- Taipei, New Taipei, Taoyuan, Taichung, Tainan and Kaohsiung -- rose about 20 percent from the previous year to 98,633 units.

Source: Overseas Community Affairs Council