Navigating the Singapore property market involves more than just finding your dream home; it requires a deep understanding of the financial regulations that determine how much you can *actually* borrow. Two of the most critical acronyms you will encounter are TDSR and MSR. These rules, set by the Monetary Authority of Singapore (MAS), are designed to ensure financial prudence and prevent buyers from becoming over-leveraged.
While they both limit borrowing, they apply to different property types and include different types of debt. Understanding the difference is essential for anyone looking to secure a home loan in Singapore.
Table of Contents
- What is the Total Debt Servicing Ratio (TDSR)?
- What is the Mortgage Servicing Ratio (MSR)?
- TDSR vs MSR: The Key Differences at a Glance
- How Do TDSR and MSR Work Together? (The Crucial Part)
- The “Income Haircut”: How Variable Income is Assessed
- The “Stress Test”: Calculating Your Repayments
- Why Do These Rules Exist?
What is the Total Debt Servicing Ratio (TDSR)?
The Total Debt Servicing Ratio (TDSR) is a broad, all-encompassing rule that applies to all property loans granted by financial institutions (FIs) in Singapore. Its purpose is to look at your *entire* debt situation, not just your new home loan.
The TDSR Limit: 55%
The TDSR rule states that your total monthly debt repayments cannot exceed 55% of your gross monthly income. This includes the monthly instalment of the new home loan you are applying for, plus all your other existing debts.
How is TDSR Calculated?
The formula is a comprehensive check of your finances:
(Total Monthly Debt Obligations / Gross Monthly Income) x 100% ≤ 55%
- Total Monthly Debt Obligations include:
- The proposed new mortgage payment.
- Existing mortgage payments (if any).
- Car loan payments.
- Student loan payments.
- Credit card balances (a minimum percentage is calculated).
- Any other personal loans or secured credit lines.
- Gross Monthly Income is your total income before any deductions like employee CPF contributions.
Who Does TDSR Apply To?
TDSR applies to all residential property loans granted by banks and other FIs. This includes loans for private properties (condominiums, landed houses) and HDB flats if you choose to take a bank loan.
What is the Mortgage Servicing Ratio (MSR)?
The Mortgage Servicing Ratio (MSR) is a much stricter, more specific rule. It is aimed *only* at public housing (HDB flats) and Executive Condominiums (ECs).
The MSR Limit: 30%
The MSR rule states that your monthly mortgage repayment for your HDB flat or EC cannot exceed 30% of your gross monthly income.
How is MSR Calculated?
The formula is more focused, looking only at your housing loan:
(Monthly Property Loan Repayment / Gross Monthly Income) x 100% ≤ 30%
- Monthly Property Loan Repayment only includes the mortgage instalments for your HDB flat or EC. It does not include your car loans, student loans, or credit card debts.
- Gross Monthly Income is calculated the same way as for TDSR.
Who Does MSR Apply To?
MSR applies *only* to housing loans for:
- New or resale HDB Flats.
- New or resale Executive Condominiums (ECs) purchased directly from a developer or within their Minimum Occupation Period (MOP).
This rule applies whether you are taking a loan from the HDB itself or from a private bank.
TDSR vs MSR: The Key Differences at a Glance
| Feature | Mortgage Servicing Ratio (MSR) | Total Debt Servicing Ratio (TDSR) |
|---|---|---|
| Limit | 30% of gross monthly income | 55% of gross monthly income |
| Property Type | HDB Flats & Executive Condominiums (ECs) | All property types (HDB, EC, Private Condo, Landed) |
| Debts Included | Only the home loan repayment | All debts (home loan, car loan, credit cards, etc.) |
| Loan Provider | Applies to HDB loans and bank loans | Applies only to bank/FI loans |
How Do TDSR and MSR Work Together? (The Crucial Part)
This is where many buyers get confused. The rules are not mutually exclusive. Depending on what you buy and where you get your loan, you may need to pass one or both.
Scenario 1: Buying a Private Property (Condo)
You only need to pass the TDSR (55%). Your total debts (including the new condo loan) cannot exceed 55% of your income. MSR does not apply.
Scenario 2: Buying an HDB Flat (Bank Loan)
You must pass BOTH rules. This is the strictest scenario.
- First, you must pass the MSR (30%). Your new HDB loan instalment cannot exceed 30% of your income.
- Then, you must pass the TDSR (55%). Your new HDB loan instalment *plus* all your other debts (car, cards, etc.) cannot exceed 55% of your income.
This means your other debts can significantly reduce the HDB loan amount you qualify for, even if you pass the MSR.
Scenario 3: Buying an HDB Flat (HDB Loan)
You only need to pass the MSR (30%). The TDSR framework does not apply to loans taken directly from the HDB. This is often why buyers with other existing loans (like a car loan) may find it easier to secure an HDB loan than a bank loan.
The “Income Haircut”: How Variable Income is Assessed
How do banks calculate “gross monthly income” if you’re a freelancer, salesperson, or have rental income? Banks consider this ‘variable income’ and apply a 30% “haircut”.
This means only 70% of your variable income is recognised for MSR and TDSR calculations. If you earn $10,000 a month from freelance work, the bank will only consider $7,000 as your income for the loan assessment.
The “Stress Test”: Calculating Your Repayments
Banks don’t use the current, attractive interest rate (e.g., 3.0%) to calculate your monthly instalment. Instead, they use a “stress test” rate set by MAS to ensure you can afford repayments if rates rise.
- For Bank Loans (TDSR & MSR): Banks calculate your monthly payments using a medium-term interest rate floor, which is currently 4% for residential properties.
- For HDB Loans (MSR): HDB uses an interest rate floor of 3% (or 0.1% above the prevailing CPF OA rate, whichever is higher) to compute your eligible loan amount.
Why Do These Rules Exist?
The TDSR and MSR frameworks are the Singapore government’s primary tools for maintaining a stable and sustainable property market.
- They promote financial prudence by ensuring borrowers are not spending an unhealthy portion of their income on debt.
- They prevent over-leveraging, which reduces the risk of widespread defaults during an economic downturn or interest rate hike.
- They help moderate property demand and prevent speculative bubbles, keeping prices more stable for genuine home buyers.
By understanding these two key pillars of property financing in Singapore, you can plan your budget more realistically and approach your home-buying journey with confidence.
