Everything You Need to Know About Total Debt Servicing Ratio (TDSR)

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What is Total Debt Servicing Ratio (TDSR)?

The Total Debt Servicing Ratio (TDSR) is a framework established by the Monetary Authority of Singapore (MAS) in 2013 to promote responsible lending and borrowing, encourage financial prudence and, in the long run, to curb the risk of a subprime meltdown.

How to Calculate TDSR?

The rule of thumb of the TDSR states that your total monthly debt obligations must not exceed 60% of your gross household monthly income. This sets a cap on the maximum amount of money you can borrow from financial institutions for your monthly repayments.

Here is how TDSR is calculated:

TDSR     =     
Total monthly repayments/Gross household monthly income

We understand the hassle of having to compute numbers this way. Use HugMortgage’s TDSR Calculator, for an effortless calculation. Just input the relevant information and the calculator will do the work for you.

What is Mortgage Servicing Ratio (MSR)?

The Mortgage Servicing Ratio (MSR) is a sub-component of the TDSR which is a key element to consider when applying for a home loan.

MSR dictates that your total monthly mortgage repayments must not exceed 30% of your gross household monthly income.

It is important to note that the 30% MSR cap is included in the 60% TDSR limit. Simply said, if your MSR is 30% of your gross household monthly income, you have a remainder of 30% for your other financial commitments for example Car loans, credit cards, etc.

Here is how MSR is calculated:

MSR     =     
Total monthly mortgage repayments/Gross household monthly income

An example to illustrate TDSR and MSR

Say your gross household monthly income is S$10,000.

The TDSR’s threshold is 60% of your gross household monthly income, which is S$6,000. This is the maximum sum of your total monthly repayments.

The MSR’s threshold is 30% of your gross household monthly income, which is S$3,000. This is the maximum sum of your monthly mortgage repayments.

Over a loan tenure of 25 years, with a monthly mortgage repayment of S$3,000, you can borrow up to S$900,000 for a home loan.

This means the remaining 30% of your other monthly debt obligations (excluding home loan repayments) can be up to S$3000 to pass the 60% TDSR cap.

If you are in the midst of searching for a home loan, don’t fret over the various rulings and considerations, let our mortgage experts at HugMortgage offer you unbiased home loan advice for free!