Updated: Apr 23, 2020
How Would MSR and TDSR Affect Your Mortgage & Refinancing Application?
Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) are common terms that one will come across when applying for a property loan from the financial institutions in Singapore. Before the banks proceed on with the loan, they will need to ensure that the borrowers are within the threshold limits for TDSR and MSR. These two ratios ensure that borrowers are only borrowing within their means, and it will greatly affect the maximum amount of loan that one can get from the bank.
TDSR takes into account the percentage of one’s gross monthly income that is being used to repay monthly debts, including the loan that is being applied. In order to get the loan approved, TDSR must be equal to or less than 60%. However, there are cases where loans are approved despite TDSR being above 60% (largely depends on the respective banks). On the other hand, MSR takes into account the percentage of one’s gross monthly income that is being used to repay property loans, including the loan that is being applied. MSR should not exceed 30% of the gross monthly income and it is only applicable to loans that are used to purchase HDB property or an executive condo from the developer.
If you are self-employed or a freelancer, it will mean that your maximum loan amount will be much lower. Banks will only consider 70% of the variable income (freelance writer, financial advisors, property agents etc.) and/or rental income as your gross monthly income. For property investors with higher personal debt commitments with the banks, TDSR will be one big problem for them. This is because TDSR takes into account ALL loans – car loan, renovation loan, credit card loans, other existing property loans, etc. With the threshold set at 60%, it will be hard for property investors to get the maximum amount of loan.
MSR only applies to home loans for HDB flats and executive condo (EC) that are purchased from the developer directly. If you are looking to refinance your home loan for HDB flats (purchased before 12th January 2013) or ECs (purchased before 10th December 2013), MSR will not be applicable. For HDB loans, the maximum loan tenure is (1) 25 years or (2) the number of years left after deducting the borrower’s age from 65 years, whichever is lower. This means that borrowers of a higher age will at a disadvantage due to a shorter loan tenure period. Conclusion In order to speed up the process for home loan application and to know the maximum loan amount available, one should look for a competent mortgage broker to calculate their own TDSR and MSR. In the event where the TDSR and MSR exceeds the threshold after your own calculation, one should repay the other loans before application. In addition, it would be best to keep the latest loan and credit statements from banks for a smoother application. Contact Mortgage Consultancy for an unbiased advice now! We have more 100 loan packages from 16 banks for you to compare and choose from! +65 8556 5271 https://www.mortgageconsultancy.com.sg