What is TDSR in Singapore? A Complete Guide for Homebuyers
If you’re planning to buy a property in Singapore, understanding TDSR (Total Debt Servicing Ratio) is one of the most important aspects. TDSR is a regulatory framework introduced by the Monetary Authority of Singapore (MAS) to ensure that borrowers do not overcommit themselves financially. By regulating how much of your monthly income can go toward repaying debts, TDSR protects both borrowers and loan providers in Singapore, ensuring sustainable borrowing practices.
In this guide, we’ll break down what is TDSR, why it exists, who it affects, and how it influences your home loan eligibility.
What is TDSR and Its Importance in Property Financing
The Total Debt Servicing Ratio (TDSR) measures the proportion of your gross monthly income that goes toward servicing all your debt obligations, including personal loans, used car loans, and property loans. In property financing, TDSR serves as a safeguard to prevent borrowers from taking on more debt than they can comfortably manage.
Under MAS regulations, the TDSR framework limits total debt repayments to less than or equal to 55% of a borrower’s gross monthly income. This means that if your monthly income is $10,000, the combined amount you pay toward all debts should not exceed $5,500. The TDSR framework ensures that homebuyers maintain a healthy financial balance while reducing the risk of loan defaults.
For homebuyers, TDSR is especially important because property loans often involve significant sums and long repayment tenures. Loan providers in Singapore consider TDSR to help them make informed decisions about how much to lend without putting borrowers in financial jeopardy.
Who Needs to Comply with TDSR?
All borrowers seeking home loans from licensed loan providers in Singapore are subject to TDSR requirements, but the specifics can vary depending on the type of property and the borrower’s residency status.
For HDB flats, and if you’re taking a loan from HDB, TDSR does not apply. Instead, these loans are governed by the Mortgage Servicing Ratio (MSR), which is capped at 30% of your monthly household income. The usual TDSR requirement still applies if you’re borrowing housing from a financial institution.
In the case of private properties, the same TDSR rules apply, although certain lenders may apply slightly different stress tests depending on income stability and loan tenure.
Foreigners purchasing property in Singapore are also subject to TDSR rules. Lenders will consider their total debts and gross monthly income when assessing eligibility.
Singaporean citizens, permanent residents, and foreigners alike must ensure that their total monthly debt obligations do not exceed the MAS-imposed TDSR limit of 55%.
How TDSR Affects Your Home Loan Eligibility
TDSR directly impacts the maximum loan amount a borrower can obtain. When you apply for a home loan, lenders will calculate your TDSR by including all monthly debt obligations. This includes existing loans such as personal loans, used car loans, and any other recurring liabilities, as well as the estimated monthly instalment of the property loan you are applying for.
For example, suppose you earn a gross monthly income of $12,000 and already have a personal loan with a monthly repayment of $1,500. If you are applying for a new home loan with estimated monthly instalments of $4,000, your total debt repayments would be $5,500. Using the formula for TDSR:
TDSR = (Total Monthly Debt Repayments ÷ Gross Monthly Income) × 100%
TDSR = ($5,500 ÷ $12,000) × 100% = 45.8%
Since 45.8% is below the 55% limit, you meet TDSR requirements. However, it’s important to note that certain financial institutions and loan providers in Singapore may grant property loans to borrowers whose TDSR exceeds the threshold on an exceptional basis, subject to enhanced credit evaluation. This means that while the 55% limit is the standard, borrowers who demonstrate strong creditworthiness and financial stability may still be considered for a loan above the typical TDSR ceiling.
If your total debt repayments exceed 55% of your income, lenders may reduce your eligible loan amount or reject the application entirely, unless exceptional approval is granted.
TDSR Limits Explained with Examples
The TDSR framework sets clear limits to maintain financial prudence. Here’s a breakdown of how TDSR applies in practice:
For a single borrower with a monthly income of $8,000, total monthly debts must not exceed S$4,400. For a dual-income couple earning a combined $15,000, combined monthly debts should stay under $8,250. Borrowers with existing loans, such as a personal loan of $1,000 per month and a car loan of $600, will have a reduced TDSR capacity for a property loan.
These examples illustrate how TDSR ensures that borrowers can manage debt levels responsibly while maintaining financial stability.
How to Calculate TDSR
Calculating TDSR is straightforward once you know your debts and gross income. Sum all monthly debt obligations, including personal loans, car loans, and estimated property loan instalments. Divide this total by your gross monthly income and multiply by 100 to get the percentage.
For borrowers unsure about the calculation, consulting a loan provider in Singapore or a financial adviser ensures accuracy and helps identify strategies to optimise TDSR if it approaches or exceeds the 55% limit.
How Tembusu Financial Services Can Help
Navigating TDSR and home loan eligibility can be complex, particularly for first-time buyers or those with multiple debts. We provide expert guidance to help borrowers understand what is TDSR, how to calculate TDSR, and strategies to optimise their borrowing potential. This helps homebuyers plan their finances responsibly, and secure the right home loan without overextending themselves.
Get in touch with us today to take the stress out of your property financing journey and make informed borrowing decisions.
