On 28 June, 2013 the Monetary Authority of Singapore (MAS) unleashed the TDSR to prevent you from becoming dangerously overextended because of your property purchase.
TDSR is meant to discourage you from taking part in risky financial behavior such as property speculation or buying a home that’s beyond your means. In short, TDSR is there to prevent a Singapore subprime meltdown from occurring.
What is the TDSR framework?
The TDSR limits the amount of money banks and other Financial Institutions (FIs) can lend you – which is 60% of your gross monthly income minus all of your outstanding debts, if any.
The outstanding debts that the TDSR will take into account include:
While being able to borrow up to 60% of your gross monthly income may sound like a lot, the reality is most of us carry outstanding debts and that will affect how much we can borrow.
Also, if you’re a variable income earner, the TDSR framework requires you to take a 30% “haircut” on your average monthly income. Variable income items like bonuses, allowances etc.
Take for example:
Fixed Income: If your gross monthly income is S$10,000 and have no outstanding debts, your maximum TDSR limit is S$6,000.
But if you have monthly loan and credit card obligations of S$2,000, your maximum TDSR limit will drop to S$4,000 – meaning you can only afford a home loan with monthly repayments of up to S$4,000.
Variable Income: If you have an “average” gross monthly income of S$10,000, the TDSR will require you to take a 30% “haircut”, meaning you’ll only be about to count S$7,000 as your gross monthly income. That means your maximum TDSR limit is S$4,200 if you have no outstanding debt obligations.
But if you have monthly loan and credit card obligation of S$1,500, your maximum TDSR limit will drop to S$2,700 – meaning you can only afford a home loan with monthly repayments of up to S$2,700.
How the TDSR affects your ability to purchase property
When it comes to purchasing a property, another item you must take into account is the “stress test,” which is used to determine whether you can afford a rise in interest rates without busting the 60% TDSR limit.
Currently, the stress test interest rates are 3.5% for residential properties and 4.5% for commercial properties.
The following chart illustrates how TDSR will affect your new private property purchase
TDSR is meant to discourage you from taking part in risky financial behavior such as property speculation or buying a home that’s beyond your means. In short, TDSR is there to prevent a Singapore subprime meltdown from occurring.
What is the TDSR framework?
The TDSR limits the amount of money banks and other Financial Institutions (FIs) can lend you – which is 60% of your gross monthly income minus all of your outstanding debts, if any.
The outstanding debts that the TDSR will take into account include:
- Credit card balances (including “instalment plans” with retailers)
- Student loans
- Personal loans
- Car loans
- Other home loans (if applicable)
While being able to borrow up to 60% of your gross monthly income may sound like a lot, the reality is most of us carry outstanding debts and that will affect how much we can borrow.
Also, if you’re a variable income earner, the TDSR framework requires you to take a 30% “haircut” on your average monthly income. Variable income items like bonuses, allowances etc.
Take for example:
Fixed Income: If your gross monthly income is S$10,000 and have no outstanding debts, your maximum TDSR limit is S$6,000.
But if you have monthly loan and credit card obligations of S$2,000, your maximum TDSR limit will drop to S$4,000 – meaning you can only afford a home loan with monthly repayments of up to S$4,000.
Variable Income: If you have an “average” gross monthly income of S$10,000, the TDSR will require you to take a 30% “haircut”, meaning you’ll only be about to count S$7,000 as your gross monthly income. That means your maximum TDSR limit is S$4,200 if you have no outstanding debt obligations.
But if you have monthly loan and credit card obligation of S$1,500, your maximum TDSR limit will drop to S$2,700 – meaning you can only afford a home loan with monthly repayments of up to S$2,700.
How the TDSR affects your ability to purchase property
When it comes to purchasing a property, another item you must take into account is the “stress test,” which is used to determine whether you can afford a rise in interest rates without busting the 60% TDSR limit.
Currently, the stress test interest rates are 3.5% for residential properties and 4.5% for commercial properties.
The following chart illustrates how TDSR will affect your new private property purchase
TDSR applies to all properties, but if you’re intending to purchase a Housing Development Board (HDB) resale flat or Executive Condominium (EC) – you’ll need to take into account something called the MSR.
What if you want to purchase an HDB resale flat or EC?
If you want to purchase an HDB resale flat or EC, you’ll also have to deal with the Mortgage Servicing Ratio (MSR) along with the TDSR.
The MSR limits the amount you can borrow on the purchase of an HDB or EC to 30% of your gross monthly income. So if you’re making S$8,000 a month, the most the MSR will allow you to pay on your monthly mortgage repayments is S$2,400.
That means that even if you have no outstanding debts and can borrow 60% of your gross monthly income under the TDSR, if you want to buy an HDB flat, the most you can borrow is only 30% of your gross monthly income.
How can you calculate TDSR on your own?
There are several free TDSR calculators out there that can give you a good idea of how much you can borrow and what your maximum loan tenor will be, you can check out at : -
What if you want to purchase an HDB resale flat or EC?
If you want to purchase an HDB resale flat or EC, you’ll also have to deal with the Mortgage Servicing Ratio (MSR) along with the TDSR.
The MSR limits the amount you can borrow on the purchase of an HDB or EC to 30% of your gross monthly income. So if you’re making S$8,000 a month, the most the MSR will allow you to pay on your monthly mortgage repayments is S$2,400.
That means that even if you have no outstanding debts and can borrow 60% of your gross monthly income under the TDSR, if you want to buy an HDB flat, the most you can borrow is only 30% of your gross monthly income.
How can you calculate TDSR on your own?
There are several free TDSR calculators out there that can give you a good idea of how much you can borrow and what your maximum loan tenor will be, you can check out at : -
- UOB TDSR Calculator
- MoneySmart TDSR Calculator