TDSR Explained: How It Impacts Eligibility for Home Loans in Singapore

mortgage application form next to a calculator, pen, key and miniature house.

When trying to secure a housing loan, understanding how the Total Debt Servicing Ratio (TDSR) affects your eligibility is crucial. TDSR is calculated based on your financial commitments and will affect how much you are eligible to borrow. Whether you’re comparing home loan interest rates or trying to find the best home loan in singapore for you, your borrowing capacity is not just about the mortgage interest rate, you also need to navigate the rules that lenders follow. Read on to get an understanding of the TDSR framework to get a clearer picture of how it actually affects you.

Why TDSR Matters for Every Home Buyer

TDSR serves as a gatekeeper for borrowers seeking a home loan in singapore. Introduced by the Monetary Authority of Singapore (MAS) in 2013, it aims to prevent households from taking on more debt than they can reasonably manage.

The latest rules cap your total debt repayments, including mortgage repayments, at 55% of your gross monthly income. For anyone applying for a Home Loan, this means that even if you find a tempting interest rate for your housing loan, your eligible loan amount will still be constrained by your debt and income.

The Math Behind TDSR: What to Look At

Calculating your loan eligibility with the TDSR framework is fairly simple. For example, with a gross monthly income of $10,000, the maximum allowable debt repayment is $5,500, based on the TDSR framework. If $1,500 is already being paid monthly toward car and personal loans, you have a remaining debt allowance of up to $4,000 for your mortgage.

This limits the housing loan amount you are eligible for, as it reinforces the fact that existing commitments (such as student debt, car instalments) significantly affect your borrowing power. Therefore, when assessing different home loans in singapore, ensure that you factor in the TDSR constraint.

Calculate Your TDSR

Income vs. Commitment: Striking the Balance to Improve TDSR Score

calculating TDSR for home loan

If you discover your borrowing capacity is limited under the TDSR threshold, here’s what you can do to increase your eligible loan amount:

  • Clear any high-interest or non-essential debt (credit cards, personal loans). This means paying in full and not just the minimum amount.
  • Avoid taking on new debt prior to applying for your housing loan, such as car loans, instalment plans, etc
  • Consider a joint application (couple or family member) to boost gross household income.
  • Use a longer loan tenure (within allowable limits) so monthly repayments are lower.

By taking these actions, you can increase your income-related metrics to improve your loan eligibility under the TDSR framework.

Ways to Boost Your Housing Loan Eligibility

These are quick tips to increase your allowable home loan amount in singapore:

  • Clear or restructure minor outstanding debts before applying for a loan.
  • Increase your declared stable income where possible (rental income, bonuses) and ensure it meets the bank’s criteria.
  • Delay taking discretionary loans (e.g., new vehicle) until after your home loan is secured.

Beyond TDSR: When MSR Comes Into Play for HDB Buyers

For buyers of Housing & Development Board (HDB) flats and new launch executive condominiums (EC), the Mortgage Servicing Ratio (MSR) is another important factor. MSR restricts your mortgage repayments (not total debt) to a maximum of 30% of your gross monthly income.

Therefore, if you qualify for a housing loan and meet the TDSR requirements, you may still be limited by MSR. In this case, you must consider both TDSR and MSR where relevant when comparing home loan interest rates.

Plan Ahead With mortgageplus to Get the Best home loan in singapore

house, calendar and phone showing, home loan payments

Securing the Best home loan in singapore means more than just chasing the lowest interest rate. It means working within the TDSR and MSR frameworks and choosing a housing loan that suits your long-term financial picture. If you want support to navigate the home loan landscape with ease, partner with mortgageplus today!

FAQ

  1. How is TDSR calculated?
    TDSR is calculated by dividing your total monthly debt obligations (such as mortgages, car loans, and credit card payments) by your gross monthly income. The current TDSR threshold in singapore is 55%.
  2. How does TDSR affect my housing loan eligibility?
    If your TDSR exceeds 55%, your housing loan application may be rejected or the loan amount reduced. Lenders use TDSR to assess whether you can afford mortgage repayments without financial strain.
  3. What’s the difference between TDSR and MSR?
    TDSR ( Total Debt Servicing Ratio) limits total debt obligations, while MSR (Mortgage Servicing Ratio) applies specifically to HDB and Executive Condo buyers and caps the portion of income used for home loans in singapore.