Navigating the TDSR: Your Key to a Home Loan in Singapore

At the cusp of securing property financing, it’s crucial to understand the role of the Total Debt Servicing Ratio (TDSR). Enforced by the Monetary Authority of Singapore (MAS), TDSR serves as a guiding tool for banks to ascertain whether prospective borrowers can afford the loan they are applying for.

TDSR: Ensuring Responsible Borrowing

Introduced in June 2013, the TDSR was designed as a guardrail to prevent individuals from overborrowing. It encouraged a more thoughtful, cautious approach to borrowing, in contrast to rushing headlong into heavy loan commitments. The ultimate goal was to foster a culture of prudent, responsible borrowing.

TDSR’s Influence on Property Prices

The TDSR’s implementation has significantly shaped the property market, contributing to a decline in property prices. The Singapore Residential Property Price Index exhibits an upswing in property prices post the global financial crisis, followed by a downtrend after the TDSR rollout. By making loans more challenging to secure, the TDSR has facilitated a much-needed stabilization of property prices.

Understanding TDSR’s Impact on Your Home Loan

The TDSR effectively caps the amount you can allocate to your monthly debt repayments, which could include student loans, car loans, personal loans, and other financial commitments. Initially set at 60%, the TDSR was revised to 55% on December 16, 2021, in response to rapidly escalating property prices. A lower TDSR enhances the likelihood of your loan getting approved, bringing you closer to owning your dream home.

Decoding the TDSR Calculation

Figuring out your TDSR involves a simple process: divide your total monthly debt obligations by your gross monthly income and multiply the result by 100%. For example, if your gross monthly income is $10,000 and your total monthly debt obligations amount to $5,000, your TDSR would be 50%. However, additional components like variable income and income-weighted average age can complicate this calculation, warranting expert advice for accuracy.

TDSR: An Aid, Not a Hurdle

While it might initially seem like an impediment, the TDSR is actually a potent tool to safeguard your financial health. By promoting responsible borrowing and helping you maintain a manageable TDSR, it ensures you steer clear of unaffordable repayments and debt stress. Remember, knowledge is power, and understanding the TDSR can empower you to tread confidently towards your financial dreams.

Your Next Steps

To delve deeper into mortgage refinancing and uncover strategies to optimise your property loan, sign up for our forthcoming webinar on Mastering Mortgage Refinancing, conducted in association with a leading mortgage broker in Singapore. Perfect for individuals aiming to save on interest, adjust loan tenure, cash out home equity, improve their debt ratio, or foray into property investment, this webinar is an opportunity you wouldn’t want to miss. To stay abreast of the latest financial trends and insights, subscribe to FMS Financial Insights and receive our weekly newsletter.

Planning Your Financial Future

Consider this – if you invest $48,000 annually for the next 10 years, you could accumulate a substantial portfolio. Assuming an annual return rate of 6%, your portfolio could grow to approximately $663,255.56 in 10 years. This investment strategy could potentially generate a passive income of approximately $39,795.33 each year, enhancing your financial security in the long term.

Why not take the first step towards securing your future today? Schedule a call with Ben, our expert passive income guy, and start crafting your unique investment plan.


Benjamin Low
Benjamin Low

Benjamin is known as The Passive Income Guy. He has helped hundreds of people to build passive income. He is also a member of the Million Dollar Round Table, and Certified Financial Planner™ (CFP®) and Certified Private Banker (CPB).

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