MSR (Mortgage Servicing Ratio) and TDSR (Total Debt Servicing Ratio) are one of the few important terms used by property buyers and investors.
Home buyers who are using a loan or mortgage will need to know this. If you are planning to invest in property, you should know about them too.
The two terms are part of the MAS regulations for financial institutions and banks to comply. This is to prevent the consumers from over stretching from paying too much monthly instalments for a property. Different properties have different regulations to comply to.
It depends on whether you are buying an HDB, EC or private property, and it affects your maximum loan eligibility.
Mortgage Servicing Ratio
Under the mortgage servicing ratio or MSR, a maximum of 30% of your gross monthly income can be used to repay your loan.
This does not include the additional CPF that your employer pays you.
To calculate your MSR, use the following formula:
(Monthly repayment instalments for all property loans / Gross monthly Income) x 100% must be less or equal to 30%
Mortgage servicing ratio applies if you are buying an HDB flat or an Executive Condominium.
Total Debt Servicing Ratio
Under the total debt servicing ratio or TDSR, a maximum of 60% of your gross monthly income can be used to repay your loan.
It includes ALL your debt obligations such as credit card bills and monthly car instalments. If you have other debt obligations, the TDSR will be lower, making your maximum loan eligibility lower as well.
To calculate your TDSR, use the following formula:
(Monthly repayment instalments for all loans / Gross monthly Income) x 100% must be less or equal to 60%
For example, if your other debt obligations such as your monthly car instalments take up 10% of your income, hence, you can only use up to 50% of your income to pay for your home.
Total debt servicing ratio applies if you are buying private property such as a condominium or a landed property.
You can use my Maximum Loan Calculator to check how much loan you can get based on your income.