What are TDSR and MSR? And how do they affect your mortgage?

TDSR and MSR are crucial considerations when it comes to home loans in Singapore

What are TDSR and MSR? And how do they affect your mortgage?

While jargons like TDSR and MSR have been around for almost a decade, there are still many misconceptions about the two terms. In this article, we dive into explaining TDSR and MSR and how they would affect your mortgage loan. 

What is TDSR?

The Total Debt Servicing Ratio (TDSR) framework was introduced by the Monetary Authority of Singapore (MAS) on 28 June 2013 to ensure that Singaporeans borrow responsibly and within their means.

In essence, TDSR limits the amount you can spend on your monthly debt repayments to 60% of your gross monthly income. It considers all your debt obligations, such as student loans, car loans, credit cards, etc. 

Failure to meet the 60% TDSR threshold would render your mortgage loan unqualified.

Find out what you can do if you fail your TDSR here. 

Woman looking at her credit card bill on her laptop, which accounts for part of her TDSR

How does TDSR affect you?

With TDSR being implemented, you may have to stretch out your repayment period to keep within the TDSR limits. The more debt obligations you have, the less you might be able to borrow from the bank for your home loan. 

Additionally, according to TDSR guidelines, guarantors are no longer allowed. This means that you’ll not be able to depend on the guarantor’s income to secure your property loan, thus making it more difficult to purchase the property.

How to calculate your TDSR

The TDSR is calculated by dividing your total monthly debt obligations by your gross monthly income. 

TDSR = (Total monthly debt obligations) / (Gross monthly income)

Depending on whether you have a fixed or variable income, the calculation differs.

Fixed income

Here’s a table illustrating the TDSR calculation for monthly fixed income of $10,000:

Monthly incomeMonthly debt obligationsTDSR
calculation
TDSR threshold
Scenario 1$10,000– $0/$10,000 = 0%60%
Scenario 2$10,000$1,000 (car loan)$1,000/$10,000 = 10% 50% (60% – 10%)

In Scenario 1, Clement’s TDSR threshold is $6,000 monthly. He can apply for a home loan with a maximum repayment of $6,000 monthly. 

In Scenario 2, Clement’s TDSR threshold is $5,000 monthly. He can apply for a home loan with a maximum repayment of $5,000 monthly. 

Variable income

If you’re self-employed and draw a variable monthly income, you’re subjected to a 30% ‘haircut’. This means that only 70% of your income will be recognised.

For example:

Nicole is self-employed and earns a monthly income of $10,000. The income recognised is 70% of the monthly income = 0.7($10,000) = $7,000.

  • Scenario 1: If Nicole has no other financial obligations, Nicole’s TDSR threshold is $4,200 monthly (0.6(7,000) = $4,200). She can apply for a home loan with a maximum repayment of $4,200 monthly.
  • Scenario 2: If Nicole has an additional study loan of $1,000, her TDSR threshold will be $3,200 ($4,200 – $1,000 = $3,200). She can apply for a home loan with a maximum repayment of $3,200 monthly.
A family in the kitchen looking happy that their TDSR meets the 60% limitation

What is MSR?

The Mortgage Servicing Ratio (MSR) was introduced by the Monetary Authority of Singapore (MAS) on 12 January 2013 with the same aim – to ensure that Singaporeans borrow within their means to finance their property loans. It also prevents the overheating of the real estate market. 

MSR limits the amount you can spend on your mortgage repayments to 30% of your gross monthly income.

While TDSR applies to all properties, MSR only applies to HDB flats and Executive Condominiums (ECs) directly purchased from the developer.

How does MSR affect you?

If your property loan is subjected to both MSR and TDSR, your monthly mortgage repayment instalment would be the lower of the 2 calculated loan amounts.

Here’s an example based on the following information: 

  • Vincent is drawing a fixed salary of $2,000.
  • Vicky is drawing a fixed salary of $2,500.
  • Vincent and Vicky have no other commitments.
ThresholdMaximum amount spent on mortgage repayment
Mortgage Servicing Ratio(MSR)(Amount spend on mortgage repayments / Gross monthly income) = ≤30%0.3 ($2,000 + $2,500) = $1,350
Total Debt Servicing Ratio(TDSR)(Total monthly debt obligations) / (Gross monthly income) = ≤60%0.6 ($2,000 + $2,500) = $2,700

Taking the lower of the 2 calculated loan amounts, Vincent and Vicky’s maximum monthly mortgage repayment instalment would be $1,350.

Comparing TDSR and MSR

Total Debt Servicing Ratio(TDSR)Mortgage Servicing Ratio(MSR)
Introduced on28 June 201312 January 2013
What is it?Limits monthly housing loan to 60% of an individual’s gross monthly income, taking into account an individual’s other financial commitmentsLimits monthly housing loan to 30% of an individual’s gross monthly income
Formula(Total monthly debt obligations) / (Gross monthly income) (Amount spent on mortgage repayments) / (Gross monthly income)
To qualify≤60%≤30%
Applicable toAll properties– HDB flats
– ECs directly purchased from the developer

When taking out a mortgage loan, TDSR and MSR are financial jargons that you should wrap your head around. Learn about other home loan terms in our glossary here. 

We cover some jargons in the Letter of Offer here.

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