At a glance...
The Total Debt Servicing Ratio (TDSR) helps determine if one is eligible to get a mortgage loan, restricting the amount one can borrow when financing a private property loan to 60% of gross monthly income.
This framework was introduced in 2013 by the Monetary Authority of Singapore ((MAS) to ensure Singaporeans are borrowing responsibly within their means. It considers all relevant debt obligations including car loans, credit card loans etc.
Essentially, TDSR = (total commitments)/(total income) = ≤ 60%
There can be various meanings as to why you may fail your TDSR, including having high financial commitments or insufficient income.
If you have failed your TDSR, here are some tips to help you meet the 60% threshold.
Reducing your financial commitments
Having too high financial commitments can be a reason why you may have failed your TDSR.
To reduce your financial commitments, you can pay off any outstanding loans, such as personal loans, car loans and credit card bills. Paying off these loans can help increase the maximum amount of housing loan you can borrow.
Increasing your income
Increasing your income can also help increase the amount of housing loan you can borrow. According to the MAS Notice 645, the Eligible Financial Assets Value can be included as part of your gross monthly income.
Eligible financial assets include shares, stocks, trusts, foreign currency and structured deposits.
Any monthly rental income can be included as your additional income. The income recognition breakdown include:
|Source of Income||Percentage Recognised|
|Cash / Fixed Deposits (pledged)||100%|
|Cash / Fixed Deposits (unpledged)||30%|
|Unit Trusts (pledged)||70 - 100%|
|Unit Trusts (unpledged)||30%|
If you’re refinancing any owner-occupied property loans, you can be exempted from the 60% TDSR threshold, if you pass the financial institution’s credit assessment.
Similarly, if you are refinancing any investment property loans, you will also be exempted from the 60% TDSR threshold. Do note that you will also have to pay 3% of the outstanding loan in cash.