Home Loans

Only 15% of Home Buyers Qualify For The Loan They Need. Why Is It So Hard?

Mark Cheng



According to a Straits Times report, the number of people who have been able to get a home loan since the implementation of the Total Debt Servicing Ratio (TDSR) regulations last year has dropped dramatically. How badly are people affected? And do you really want to take a gamble on your home purchase when it comes to applying for a home loan?

What’s The Big Deal About TDSR?

The new regulations that were put in place at the end of June 2013 take into account an applicant’s combined debt, which includes other loans such as car loans, personal loans, and unsecured lines of credit, which in most cases means credit cards. The total percentage adds up to 60%.

What this means is that on top of the existing Mortgage Servicing Ratio of 30%, which means that you can only use 30% of your income to service your home loan, you have an additional 30% allowance to take into account other debt. If you are still confused, we’ve done a full rundown of how the regulations affect you.


How Badly Are People Affected

Ms Christine Li, the head of research and consultancy at OrangeTee, told The Straits Times that only 12 potential buyers out of 80 were able to get the full loan amount they required to buy a house. According to some other bankers, loan rejection rates have risen to 20-25% after the implementation.

What does this mean?

It simply means that if you can’t qualify for the full amount, you’re going to have come out with more cash from your pocket. Easy right?

Wrong. What this could result in is you forfeiting your Option-To-Purchase fee, which is in the thousands, not to mention the immense headache you’re going to get from having to figure out the home buying process all over again.


What Can You Do About It?

We could preach till the cows come home about good financial management, and why it is absolutely ridiculous to have in excess of 20 credit cards (true story). But clearly, this rule was implemented because the Government can smell the poor money management habits of many Singaporeans from a mile away. Anyway, we’ll leave those lessons in bite size chunks, so follow us on Facebook for your daily required intake of financial supplements.

What you can do, in the meantime, without having to go through the crazy hassle of getting an In-Principle Approval (IPA) from each bank that you want to apply to is to use this simple calculator that will take into account all the various factors that go into getting a home loan.

Here at MoneySmart, we believe in making money management easier, and this easy-to-use calculator takes just 10 minutes to use, and provides you with a full report on each of the aspects of TDSR you need to know about. So don’t become part of the statistics, when clearly getting your home is much more important.


Have you encountered problems with getting a home loan? Will this rapidly kill the housing market? Share your thoughts here.

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Mark Cheng

I rant and rave a lot, but when I'm not busy doing that, I'm managing the content for MoneySmart. I love Singapore, but I also believe in helping it to improve bit by bit, and that's where MoneySmart comes in. Have some thoughts? Drop me an email at [email protected]