When was TDSR implemented?
TDSR took effect on 28 Jun 2013 for all borrowers who apply loans from financial institutions.
Why implement TDSR?
TDSR is aimed at strengthening the practices of financial institutions when issuing loans to borrowers, and serve to encourage financial prudence to borrowers. In this way, TDSR helps to ensure borrowers do not take on excessive leverage in their property purchases.
When is TDSR applicable?
Financial institution will assess your TDSR when applying for:
- 1) any loan for the purchase of a property
- 2) any loan otherwise secured by property
- 3) any re-financing loan in respect of a loan in (1) and (2)
The property in relation to the loan applied include both residential and non-residential property (e.g. industrial and commercial property), and will cover property both in and outside of Singapore. The TDSR rules will apply to loans where the application date is on or after 29 June 2013.
Understand more about computation of TDSR
The calculation of TDSR centres around the formula below:
(Monthly total debt obligations / Gross monthly income) x 100%
Where there is 2 or more borrowers, the monthly total debt obligation is the monthly repayment instalment for all the borrowers. The gross monthly income shall be the aggregate all the borrowers’ gross monthly income.
To be eligible for the loan amount, your TDSR must not exceed 60 per cent.
1) Will I be subject to TDSR when i refinance my loan?
TDSR is applicable during refinancing but TDSR is exempted if the loan is for an owner- occupied property and where:
(i) the option to purchase (OTP) the residential property was granted prior to 29 June 2013;
(ii) the residential property is the only property owned by the borrower (either by himself or jointly);
(iii) the borrower is one of the occupiers of the residential property;
(iv) the borrower does not have any outstanding loan for the purchase of any other property or the re-financing of such a loan, apart from the residential property being re-financed; and
(v) the borrower does not have any outstanding loan (either in his own name or jointly with another borrower) otherwise secured on any property, including the residential property being re-financed, or the re-financing of such a loan.
This exemption will also apply to borrowers who are owner-occupiers and are unable to meet the existing 30 per cent Mortgage Servicing Ratio (MSR) limit on re-financing loans extended by FIs in relation to HDB flats.
2) What is the difference between MSR and TDSR?
TDSR was implemented on 28 June 2013 and meant to serve as a long-term measure to ensure financial institutions practise prudence when disbursing property loans.
On the other hand, MSR was mandated for MAS-regulated financial institutions since 12 Jan 2013.
|For MSR, the monthly repayment of a mortgage cannot be more than 30 per cent of a borrower's gross monthly income||For TDSR, it takes into account all monthly debt liabilities which include the mortgage repayment. This must not be more than 60 per cent of the borrower's gross monthly income|
|The MSR applies to all mortgages, whether by financial institutions or HDB, for the purpose of purchase of a HDB flat or Executive Condominium||TDSR is applicable to all property loans, regardless of residential properties, commercial properties, etc that are granted by financial institutions|
|For computing MSR, the medium-term rate of 3.5% per cent, or the existing market rate, whichever is higher, must be used. If the borrower is taking HDB concessionary loan, the rate to be used is the prevailing rate of the loan is 2.60 per cent||For computing TDSR, the financial institutions have to use a specified medium-term rate (3.5 per cent for housing loans, and 4.5 per cent for non-residential property loans or the existing market rate), whichever is higher|
|For refinancing, MSR will not apply to loans for HDB flats and Executive Condominiums that are owner-occupied, provided they were purchased before their respective MSR implementation dates||For refinancing, TDSR will not apply if the residential property is owner-occupied, provided the Option to Purchase (OTP) of the residential property was granted before 29 June 2013|
3) Is TDSR applicable when i apply for non-property loans?
Financial institutions are not required to assess your TDSR when applying for loans that are not for the purchase of property or otherwise secured by property (e.g. credit cards, study loans and car loans).
4) Are there any financial assets that I can include in the TDSR computation to increase the amount I can borrow?
You can include certain income streams which can be considered as liquid financial assets (i.e. Singapore dollar and coins, including deposits), and a specified list of other assets, namely collective investment schemes, business trusts, debentures or stocks, structured deposits, foreign currency notes and coins (including deposits) and gold, which have a secondary market or reasonable basis for valuation and to the extent that the asset is unencumbered.