The Mortgage Servicing Ratio (MSR) is the share of a borrower’s gross monthly income that goes to repaying property loans. MAS caps it at 30% for bank loans to buy an HDB flat, or an executive condominium whose minimum occupation period has not ended, and HDB caps instalments on its own loans at 30% of income. Banks work out the instalment on the new loan at a rate of at least 4% (for options to purchase from 30 September 2022); HDB sizes its loans at a rate of at least 3%.
Key takeaways
- MAS defines the MSR as the share of gross monthly income that goes to repaying all property loans, including the one being applied for: monthly instalments on all property loans ÷ gross monthly income × 100%. For a bank loan it applies only to loans for an HDB flat, or an EC whose minimum occupation period has not ended — not to other private property — and to refinancing such a loan only where the borrower does not live in the property. It is capped at 30%; for a joint application, at 30% of the borrowers’ aggregate gross monthly income.
- Banks work out the instalment on the new loan at its actual tenure and at a medium-term rate: the higher of a 4% floor and the thereafter interest rate, for options to purchase dated from 30 September 2022 (3.5% before). Introductory rates are not used. The instalment counts CPF-paid amounts too, and MAS’s explainer adds at least 20% of the instalment on any property loan the borrower guarantees.
- Gross monthly income is income before tax, excluding the employer’s CPF. Banks count variable income — commission, bonus or allowance — at no more than 70% of either its average over the preceding 12 months or the latest IRAS Notice of Assessment amount divided by 12, on top of any fixed income; rental income counts at most 70%, and only with a stamped tenancy agreement that has at least six months left.
- HDB caps instalments on its own loans at 30% of the applicants’ monthly income and sizes the loan at the higher of a 3% floor and the HDB rate. HDB counts the applicants’ income including the employee’s CPF but excludes the employer’s CPF and bonuses.
- A bank loan for an HDB flat is tested against both the 30% MSR on property instalments and the 55% TDSR on all debts (for options to purchase from 16 December 2021); the MSR is a hard cap, while MAS lets banks exceed the TDSR threshold only in exceptional cases. MAS set the 30% MSR on bank loans for HDB flats where the option to purchase was granted on or after 12 January 2013, when HDB cut its own loans’ MSR from up to 40% to up to 35%; HDB’s cap is 30% today. The MSR does not apply to refinancing an owner-occupied loan.
What is the Mortgage Servicing Ratio?
Two income caps and two interest floors are among the limits on how much can be borrowed for an HDB flat; the loan-to-value limit and tenure also apply, and the TDSR applies to bank loans only.
Bridging loans repayable within six months are outside both the MSR and the TDSR.
How much the 30% cap allows
The largest loan a 30% instalment supports, before any other limit: a bank loan worked out at the 4% floor and an HDB loan at the 3% floor, both over 25 years, with no other property loans. A bank loan for an HDB flat can run to 30 years, but beyond 25 years MAS lowers the loan-to-value limit from 75% to 55%. Money Snap’s arithmetic; the loan-to-value limit and the applicant’s age can cut these further.
| Gross monthly income | MSR limit a month | Bank loan, 4%, 25 years | HDB loan, 3%, 25 years |
|---|---|---|---|
| SGD 6,000 | SGD 1,800 | SGD 341,014 | SGD 379,578 |
| SGD 8,000 | SGD 2,400 | SGD 454,686 | SGD 506,103 |
| SGD 10,000 | SGD 3,000 | SGD 568,357 | SGD 632,629 |
| SGD 12,000 | SGD 3,600 | SGD 682,029 | SGD 759,155 |
Fixed pay SGD 6,000 a month, bonuses averaging SGD 1,000 a month
Money Snap’s illustration of MAS Notice 645’s income rules for a bank loan: variable income is counted at no more than 70% of its 12-month average. HDB’s own assessment leaves bonuses out altogether.
Where the MSR shows up
Five things people get wrong
- MAS — MSR and TDSR Rules — the definition, scope and formula
- MAS — Calculating TDSR — income, rate floor and guarantees
- MAS — Notice 645 — the binding MSR rule and income rules
- MAS — Measures of 29 Sep 2022 — the 4% and 3% floors
- MAS — Annex III, 11 Jan 2013 — when the MSR began
- HDB — Housing Loan from HDB — the 30% cap and 3% floor on HDB loans
- HDB — Income guidelines for the HFE letter — what income HDB counts
- MoneySense — Buying a property: how much can you afford? — HDB loans and bank loans compared
Official MAS, HDB and MoneySense rules, for general information only. Not financial advice.
This page is provided for educational and informational purposes only. It does not constitute financial advice. All figures and worked examples are estimates for illustrative purposes, are subject to change, and do not reflect any individual’s circumstances. Always refer to MAS, HDB and MoneySense and seek independent professional advice before making any financial decisions.