What is the Total Debt Servicing Ratio?

Key takeaways

• MAS works out the TDSR as (borrower’s total monthly debt obligations ÷ borrower’s gross monthly income) × 100%. The debts include property-related loans (including the loan being applied for), car loans, student loans, renovation loans, credit card loans and any other secured or unsecured loans, including revolving loans. Under MAS Notice 645, not less than 20% of the instalment on any other loan the borrower guarantees also counts; existing debts are taken at the instalment in the latest credit bureau report, and where the report shows none, an unsecured revolving loan counts at the minimum amount due on its latest statement.
• For property loans where the option to purchase is granted on or after 16 December 2021, and mortgage equity withdrawal loan applications from that date, MAS sets the TDSR threshold at a maximum of 55% of the borrower’s monthly income, down from the 60% at which the framework began on 29 June 2013. Under MAS’s TDSR Guidelines, 60% still applies to a purchase loan, or its refinancing, where the option to purchase (or, without one, the sale and purchase agreement) is dated before 16 December 2021, and to a loan otherwise secured by property, or its refinancing, first applied for before then. MAS says the loan amount has to be reduced where a borrower’s TDSR exceeds 55%, and that loans above the threshold should be granted only in exceptional cases, which the institution must document, subject to enhanced credit evaluation, and report to MAS; a refinancing above the threshold also needs a debt reduction plan.
• MAS requires the TDSR for any loan to buy property, any loan secured by property and any refinancing of these, for residential and non-residential property in and outside Singapore. It applies to individuals, not to loans to companies, but covers a sole proprietor or an individual setting up a company solely to buy property. An owner-occupier refinancing a loan to buy a property is exempt, and the rules do not apply to bridging loans repaid within 6 months, loans secured by a pool of collateral in which the property’s market value is less than 50% of the credit limit, or a mortgage equity withdrawal loan whose LTV, with any other loans on the same property, does not exceed 50%.
• The instalment on the property loan being applied for — not on existing property loans — is worked out at its actual tenure and at a medium-term rate: the higher of the thereafter interest rate and a floor of 4% (residential) or 5% (non-residential), where the option to purchase (or, without one, the sale and purchase agreement) is dated on or after 30 September 2022, or a loan otherwise secured by property is applied for from that date. Earlier-dated loans and their refinancing use floors of 3.5% and 4.5%. The thereafter rate is the highest rate offered at any time over the tenure, typically after the introductory or lock-in period; for a floating rate, it is the reference rate on the date of application plus the spread.
• Gross monthly income is income before tax, excluding the employer’s CPF contribution. Institutions apply a minimum 30% haircut to variable and rental income: commission, bonus or allowance counts at no more than 70% of its average over the preceding 12 months, or, using the latest IRAS Notice of Assessment divided by 12, at no more than 70% of the variable part of employment income (of the whole amount for a borrower whose income is variable only, or where the fixed and variable parts cannot be separated), and rent counts only with a stamped tenancy agreement that has at least 6 months left. Eligible financial assets can be added, spread over 48 months after a minimum haircut of 0% for Singapore-dollar cash and deposits pledged for at least 4 years, 30% for other eligible assets so pledged, and 70% for any eligible asset unpledged or pledged for less than 4 years.