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What is TDSR?
The Total Debt Servicing Ratio (TDSR) is a cap on the total amount that you can spend on your monthly mortgage debt repayments. With TDSR, your monthly loan repayment and other outstanding debts, cannot exceed 55% of your monthly income. (As of 16 December 2021)
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How to calculate TDSR?
To compute your Total Debt Servicing Ratio (TDSR), follow these steps: Take your monthly debt repayments, which encompass all outstanding debts such as property-related loans (including the one you’re currently applying for), car loans, renovation loans, credit card loans, and more. Divide this total by your gross monthly income, then multiply the result by 100%. The crucial point is that this figure must not exceed 55%.
For individuals with variable and/or rental income, only 70% of your total assessed income will be factored into the TDSR calculation. Variable income includes items such as commissions, bonuses, and allowances. Financial institutions will typically consider the average of your monthly variable income earned in the preceding 12 months.
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While the Total Debt Servicing Ratio (TDSR) limit is set at 55%, it’s important to note that reaching this limit may not be financially wise. It is generally advisable that your monthly debt repayments should not surpass the range of 30% to 40% of your monthly income, regardless of the TDSR limit.
If you find yourself approaching the TDSR limit, it may indicate that the property you’re contemplating could be stretching your budget beyond what is comfortable and financially sustainable.
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If you can’t meet the TDSR, there are a few options available:
- Make a bigger downpayment
- Stretch out your loan tenure
- Consider a cheaper property
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Why is there TDSR?
- TDSR prevents borrowers from accumulating too much debt for their property purchases
- TDSR encourages financial prudence among Singaporeans
- TDSR helps to ensure long-term sustainability in the property market by slowing down property sales and keep the cost of property manageable
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Using your CPF to buy a property under the Housing Scheme
Your OA savings can be used to buy a HDB flat, or buy or build private and residential properties in Singapore. OA savings can also be used for downpayment and housing loan taken for the property purchase, stamp and legal fees, loan taken for the construction of your house and the purchase of vacant land (for private properties only), as well as Home Protection Scheme premiums (for HDB flats only).
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How Much You Have To Pay when you Own Multiple Properties
If we are buying our second or subsequent residential property, we have to fork out for the Additional Buyer’s Stamp Duty (ABSD).
It’s also slightly more complicated than calculating the Buyer’s Stamp Duty (BSD) that we have to pay. Rather than based on the incremental value of our property, it’s based on the profile of the buyer, with a flat ABSD rate slapped on the entire purchase price of the property.
#PropertyFactSheet #Property #Affordability
