Real Estate Investment Affordability (TDSR/MSR)
Unlocking Your Property Affordability : Discover the Perfect Budget for Your Dream Home Purchase
Your dream home is within reach, and we’re here to help you find your ideal budget with confidence. By understanding your property affordability, you can take the first step towards making your dream of homeownership a reality. Let’s explore your options and discover the perfect home that fits comfortably within your financial means.
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)
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.
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.
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
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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