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Affordability
AFFORDIBILITY
What is the Total Debt Servicing Ratio (TDSR) framework?
The TDSR framework requires a bank to take into consideration all outstanding debt obligations of a borrower when granting a housing loan to the borrower. It ensures that borrowers do not buy properties which are beyond their financial means and encourages borrowers to reduce their debt servicing burden and vulnerability to adverse economic conditions or a change in interest rates. Please check with your bank on the prevailing TDSR threshold.
When does the TDSR threshold apply to me?
The TDSR threshold will impact you when you apply for the following types of property loans on or after 29 June 2013:
- Any loan for the purchase of a property; and
- Any loan secured on a borrower’s equity in a property
The TDSR threshold will also impact you when you re-finance your property loan, except where:
- the re-financing is in respect of a loan for the purchase of a residential property which you are occupying; or
- you commit to a debt reduction plan with your bank at the time of re- financing. Please check with your bank on the details of the debt reduction plan
How is TDSR computed?
- The TDSR is computed as follows:
(monthly total debt obligations / gross monthly income) X 100% - All your outstanding debt obligations have to be taken into account when computing your TDSR. Debt obligations include all property loans and non- property related loans such as car loans, renovation loans, student loans and credit card facilities
- If you are a guarantor of any loan, a portion of the monthly repayment instalment towards the loan will be taken into account when computing your TDSR. Please check with your bank on the minimum amount that has to be taken into account
- Gross monthly income refers to your monthly income before tax, and includes:
– your monthly fixed employment income
– average monthly variable income (e.g. commission, bonus and allowance) from your employer earned in the preceding 12 months, subject to a haircut. Please check with your bank on the minimum haircut required
– monthly rental income, subject to a haircut. You must also provide your bank with a copy of the stamped tenancy agreement signed by you (as the landlord) and your tenant. The agreement must have a remaining rental period of a certain period at the time of your property loan application. Please check with your bank on the minimum haircut and remaining rental period required
– certain eligible financial assets, subject to haircuts and amortisation over a certain period of time for conversion into “monthly income streams”. Please check with your bank on the eligible financial assets, minimum haircut required and amortisation period
– Gross monthly income excludes any contributions made to your CPF accounts by your employer
What documents do I need to submit to my bank to compute my TDSR?
You should submit to the bank:
- your latest available statement from IRAS and CPF Board
- if you have a monthly rental income, a copy of the stamped tenancy agreement signed by you (as the landlord) and your tenant
- your written declaration on (I) all outstanding debt obligations (e.g.type of loan, outstanding loan amount, monthly repayment instalment, applicable interest rate and loan tenure), and (ii) all sources of gross monthly income in the period of at least 12 months before the time of housing loan application
- any other information that can help confirm your gross monthly income and outstanding debt obligations
What documents do I need to submit to my bank to compute my TDSR?
The MSR limit caps the monthly mortgage instalments at a percentage of a borrower’s gross monthly income when he applies for a housing loan for the purchase of an executive condominium (EC) directly from a property developer or any HDB flat. Please check with your bank on the prevailing MSR limit
When does the MSR limit apply to me?
The MSR limit applies to you when you apply for a housing loan to purchase:
- a HDB flat and the option to purchase the HDB flat is granted on or after 12 January 2013; or
- an EC bought directly from a property developer and the option to purchase the EC is granted on or after 10 December 2013
- A bank will also compute your MSR if you are re-financing your housing loan for an EC bought directly from a property developer and which is still within the minimum occupation period or a HDB flat, unless:
- you are occupying the EC or the HDB flat; or
- you commit to a debt reduction plan with your bank at the time of re- financing. Please check with your bank on the details of the debt reduction plan
When does the MSR limit apply to me?
The MSR is computed as follows:
(monthly mortgage instalments/gross monthly income) X 100% gross monthly income
Your monthly mortgage instalments include your monthly repayment instalments for:
- the housing loan for the purchase of an EC directly from a property developer or any HDB flat, which you are applying for; and
- any other housing loans or mortgage equity withdrawal loans that you have
Gross monthly income for MSR is computed in the same way as for TDSR.