Home Loans

Still Confused by the TDSR Framework? You Won’t Be After Reading This

Mortgage application with miniature house and key

Jeff Cuellar



It’s OK to admit that you don’t understand the Total Debt Servicing Ratio (TDSR) framework. It’s not like someone is going to throw you in political “reeducation” camp for not knowing every little detail. Still, TDSR isn’t something you should just ignore – especially if you’re looking to buy a home soon.

Yes, the TDSR framework is complex. In fact, a recent United Overseas Bank (UOB) survey found that more than 1/3 of Singaporeans and Singapore Permanent Residents (PRs) surveyed had no idea how TDSR worked.

Thankfully, all you need to do is keep on reading to find out what TDSR is and how it works.


A Quick and Easy Explanation of TDSR

On 28 June, 2013 the Monetary Authority of Singapore (MAS) unleashed the TDSR to prevent you from becoming dangerously overextended because of your property purchase.

TDSR is meant to discourage you from taking part in risky financial behavior such as property speculation or buying a home that’s beyond your means. In short, TDSR is there to prevent a Singapore subprime meltdown from occurring.

How does TDSR do that?

TDSR does that by limiting the amount that Financial Institutions (FIs) can lend you, which is 60% of your gross monthly income.If you have any outstanding debts, these must be factored into the TDSR percentage and will affect how much you can afford to pay on your monthly home loan repayments.

When I say ALL of your outstanding debt, I mean the following:

  • Your Credit Card Balance(s)
  • Your Student Loan(s)
  • Your Car Loan(s)
  • Your Personal Loan(s)
  • Your Credit Term Installment Plans With Retailers

In fact, the “real” number you should be looking at when factoring TDSR is 60% of your gross monthly salary minus your total monthly debt obligations – that will show how much of a monthly home loan repayment you can afford.

*Tip: When applying for a home loan, make sure you keep records of all of your outstanding debt (credit card statements, etc.) so it’ll make it the application process a whole lot easier.


How Does TDSR Apply to Your Home Loan?

Many of those surveyed by UOB had no idea how TDSR applied to their home loan situation. So to put things in perspective, let’s look at an example.

Let’s say that your current gross monthly income is $5,000. You know that the TDSR limit is 60%.

That means that meaning that the total amount you have available to service all your monthly debts is $3,000. (60% X $5,000 = $3,000). All home loans need to fulfil the 60% TDSR requirement, but for HDB flats and Executive Condominiums (ECs), your home loan is limited by the Mortgage Servicing Ratio (MSR) of 30% as well. What that essentially means is that out of the $3,000 available in the above example, you can only use $1,500 to service your home loan. For private properties you just need to satisfy the 60% TDSR.

*Tip: If you’re a business owner, landlord, or have a commissions-based sales job, your TDSR percentage will be calculated based on 70% of your gross monthly income.


What Happens If You Exceed the 60% TDSR?

If your monthly home loan repayment and your monthly debt obligations surpass the 60% TDSR, you’ve got several options:

  • You can lower the amount you can borrow (by adjusting the loan tenure or quantum) until you’re below the 60% mark
  • You can focus on paying off a debt or two so you can free up the monthly income to use towards your home loan repayments
  • You can ask the FI for an exemption, which may or may not be approved by the FI’s credit committee

Of course, understanding how TDSR works isn’t the same as actually spending the time to calculate just how much of a home loan you can afford. Thankfully, MoneySmart has a TDSR calculator that will take all of the guess work out of finding out how much you can afford. Check it out here.


Final Note:  One of the biggest complaints made about the TDSR framework is that it’s too restrictive. However, MAS recently came out with a TDSR exemption rules that allow you to refinance your owner-occupied property OR investment property for a lower interest rate. If you want to refinance to a better interest rate, check out the latest bank rates on the MoneySmart Refinancing Wizard.


What do you think about the TDSR framework? Is it a genius move to curb property speculation or not? Tell us what you think!

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Jeff Cuellar

I'm known by many titles: copywriter, published author, literary connoisseur, ex- U.S. Army intelligence analyst, and Champion of Capua.