Understanding Total Debt Servicing Ratio (TDSR) in Singapore: A Complete Guide to Home Loan Eligibility

If you're considering financing a property purchase in Singapore, understanding the Total Debt Servicing Ratio (TDSR) is crucial. Introduced by the Monetary Authority of Singapore (MAS), the TDSR framework helps ensure that homebuyers borrow within their means and contributes to long-term stability in the property and financial markets.

This guide walks you through what TDSR means, how it's calculated, and its direct impact on your borrowing capacity when applying for a home loan.

What is TDSR?

The Total Debt Servicing Ratio (TDSR) is a regulatory limit that caps your total monthly debt repayments—including mortgages, credit cards, car loans, personal loans, and student loans—to 55% of your gross monthly income. This framework applies to all property loans issued by financial institutions in Singapore.

Why TDSR Was Implemented

TDSR was implemented in 2013 to promote prudent borrowing and prevent overleveraging. It ensures that banks and borrowers alike adopt responsible lending and repayment practices. One of its primary purposes is to curb excessive speculation in the property market and safeguard against a rise in non-performing loans.

Financial institutions must apply the TDSR limit when evaluating:

• Home loan applications

• Refinancing requests

• Loans secured by residential, commercial, or industrial properties

How TDSR Affects Your Home Loan Amount

Under the TDSR framework, your monthly debt commitments must remain within 55% of your gross income. The higher your existing debt, the lower your maximum allowable home loan.

This restriction can:

• Limit your total borrowable amount (loan quantum)

• Affect the maximum loan tenure

• Necessitate reducing other debts before securing a property loan

Other key regulations impacting your loan eligibility include:

• Loan-to-Value (LTV) Ratio: Determines how much of a property's value can be financed through a loan

• Loan Tenure Rules: Capped at 30 years for HDB flats, and 35 years for private properties

• Stress-Test Interest Rate: A notional rate (currently 4%) used to evaluate your loan affordability

TDSR and Variable Income: Income ‘Haircut’

For individuals earning variable or non-salaried income (e.g., commissions, bonuses, freelance earnings), only 70% of such income is considered in TDSR calculations. This adjustment—known as a 30% haircut—reflects the perceived higher risk of irregular earnings.

The TDSR Calculation Formula

Here’s how TDSR is calculated:

TDSR (%) = (Total Monthly Debt Obligations / Gross Monthly Income) × 100

• Monthly debt obligations include all outstanding repayments: credit cards, car loans, student loans, and proposed mortgage instalments.

• Gross monthly income includes fixed salary and 70% of any variable income.

Examples:

1. Fixed Income Scenario:

• Ben earns $10,000/month

• Total monthly loan repayments = $4,500

• TDSR = (4,500 / 10,000) × 100 = 45%

• He can still afford up to $1,000 in monthly mortgage repayments under TDSR rules.

2. Variable Income Scenario:

• Chris earns $7,000 salary + $3,000 rental income

• After a 30% haircut, rental income = $2,100

• Gross income = $7,000 + $2,100 = $9,100

• Monthly obligations = $4,500

• TDSR = (4,500 / 9,100) × 100 ≈ 49.5%

3. Joint Borrowers:

• Shirley: Income $2,500, Debt $1,000

• Her spouse: Income $5,000, Debt $3,000

• Combined: Income $7,500, Debt $4,000

• TDSR = (4,000 / 7,500) × 100 = 53.3%

Does TDSR Consider Investment Assets?

Yes. Certain financial assets such as stocks, bonds, unit trusts, and cash equivalents may be used to supplement income, subject to a discounting factor. This can improve your assessed income during the TDSR calculation, especially for retirees or high-net-worth individuals.

TDSR vs Mortgage Servicing Ratio (MSR)

While TDSR applies to all property types, MSR (Mortgage Servicing Ratio) is applicable only to HDB flats and Executive Condominiums (ECs) that have not met their Minimum Occupation Period (MOP). The MSR limits home loan repayments to 30% of your gross monthly income.

When Is TDSR Not Applicable? (Exemptions)

TDSR does not apply in certain refinancing and special scenarios:

1. Owner-Occupied Refinancing:

   • Exempted if the borrower is refinancing the loan of their current residence.

2. Investment Property Refinancing:

   • Allowed beyond the TDSR limit if:

     • A debt reduction plan is agreed upon (repay 3% over ≤ 3 years)

     • Borrower passes credit assessment

3. Mortgage Equity Withdrawal Loans (MWLs):

   • TDSR is waived if the total LTV (loan-to-value) does not exceed 50% of the property's value

4. Exceptional Cases:

   • Banks may exceed the 55% TDSR cap for special situations with:

     • Documented justification

     • Enhanced credit review

     • MAS reporting

Who Should Pay Attention to TDSR?

Anyone applying for a bank loan to purchase:

• Private property

• HDB flat (with bank loan)

• Executive Condominium (EC)

must calculate their TDSR. First-time homebuyers, upgraders, or investors should assess their debt obligations early, especially if relying on variable income.

Need Help Estimating Your Loan Eligibility?

Use a TDSR Calculator to determine your borrowing capacity. Input your income and monthly debt repayments to check how much you can qualify for.

Coming soon on bsr2.com: Singapore’s trusted mortgage calculator tools.

Algene Toh

Senior Real Estate Salesperson

Asset Investment Brokers Pte Ltd

Email: admin@bsr2.com

Phone: +65 9008 8002

Visit us: profile

Disclaimer: The information presented on BSR2.com is intended for general informational purposes only. It does not constitute legal, financial, investment, or real estate advice and should not be relied upon as such. While every effort has been made to ensure the accuracy, reliability, and completeness of the content at the time of publication, all data is derived from publicly available sources and may be subject to change without notice. BSR2.com makes no representations or warranties of any kind, express or implied, regarding the suitability, timeliness, or accuracy of the information provided for any specific purpose. Users are strongly encouraged to seek independent advice from qualified professionals before making any decisions based on the content found on this website. BSR2.com shall not be held liable for any loss, damage, or consequence, whether direct or indirect, arising from the use of or reliance on the information provided. The content is intended as a general guide and does not take into account individual circumstances.