Understanding Total Debt Servicing Ratio (TDSR) in Singapore: What Every Homebuyer Must Know

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Introduction

Buying a home in Singapore is a major milestone that comes with considerable financial responsibility. One of the most critical regulatory frameworks that every homebuyer must understand before applying for a mortgage is the Total Debt Servicing Ratio (TDSR).

Introduced by the Monetary Authority of Singapore (MAS) in 2013, the TDSR is a key mechanism designed to ensure that borrowers do not overextend themselves financially and that banks lend responsibly. Whether you’re buying your first HDB flat, upgrading to a condominium, or refinancing your current loan, the TDSR plays a central role in determining how much you can borrow.

In this in-depth guide, we will explore what the TDSR is, how it works, how it’s calculated, what types of loans it includes, and how you can plan your finances effectively around it. By the end of this article, you’ll be well-equipped to navigate your mortgage journey in Singapore with confidence.

What Is the Total Debt Servicing Ratio (TDSR)?

The TDSR is a regulatory framework that caps the total monthly debt repayments of a borrower at a certain percentage of their gross monthly income.

As of 2025, the TDSR limit is 55%. This means your total monthly debt obligations—including your new home loan—must not exceed 55% of your monthly income.

The rule applies to:

  • All residential property loans (HDB and private)

  • Investment property loans

  • Refinancing of existing loans

  • Loans taken by individuals and entities

Why Was TDSR Introduced?

The TDSR was implemented by MAS to:

  • Curb over-leveraging among individuals

  • Encourage financial prudence in property purchases

  • Standardize debt assessment methods across financial institutions

  • Ensure long-term stability in the property and financial markets

Prior to TDSR, different banks used different lending criteria, which led to inconsistent risk assessments and allowed borrowers to over-borrow relative to their income. TDSR ensures a uniform and conservative approach across all licensed lenders.

What Is Included in the TDSR Calculation?

The TDSR includes all monthly debt obligations such as:

  • Home loan repayments (principal + interest)

  • Car loans

  • Credit card balances (minimum payments)

  • Personal loans

  • Renovation loans

  • Student loans

  • Hire purchase agreements

  • Existing mortgage repayments (if buying a second property)

These are all added up and divided by your gross monthly income.

TDSR Formula

The formula used is:

TDSR = (Total Monthly Debt Obligations ÷ Gross Monthly Income) x 100%

To qualify for a home loan, this ratio must not exceed 55%.

Let’s look at a simplified example:

  • Gross monthly income: $8,000

  • Existing car loan repayment: $600

  • New home loan monthly repayment: $3,800

Total monthly debt = $600 + $3,800 = $4,400
TDSR = $4,400 ÷ $8,000 = 55%

In this case, the borrower is right at the TDSR limit. If their new home loan requires more than $3,800/month to service, they would not qualify unless they reduce their existing debts or increase their income.

How Is Gross Monthly Income Defined?

Gross monthly income includes:

  • Basic salary

  • Fixed allowances (e.g., transport, housing)

  • Variable income (e.g., bonuses, commissions, freelance earnings) — typically discounted or “haircut”

  • Rental income (usually discounted by 30%)

  • Dividend income (if recurring and proven)

  • Business income (for self-employed individuals)

Note:
Banks usually apply income haircuts to variable income sources. For instance, if your commissions vary, the bank might only consider 70% of your average commission income over the past 12 months.

For self-employed individuals, banks usually consider the average income over the past 2 years based on IRAS Notices of Assessment.

TDSR for Joint Applications

When applying jointly with a spouse or co-borrower, your combined income is used in the TDSR calculation.

Example:

  • Applicant A: $6,000

  • Applicant B: $4,000

  • Total income: $10,000

  • Total monthly debt: $5,000

  • TDSR = $5,000 ÷ $10,000 = 50%

This is acceptable under the 55% TDSR rule. However, if one co-borrower has large debts, it can reduce the loan eligibility for both applicants.

Relationship Between TDSR, MSR, and LTV

TDSR applies to all property loans.
MSR (Mortgage Servicing Ratio) only applies to HDB flats and ECs bought directly from developers and caps mortgage repayment at 30% of gross income.
LTV (Loan-to-Value ratio) limits how much of the property value you can borrow based on the number of existing loans and tenure.

Example:

  • MSR: 30% cap on HDB mortgage

  • TDSR: 55% cap on all debt obligations

  • LTV: Up to 75% (1st housing loan), lower for subsequent properties

A borrower must comply with all three when applying for a HDB mortgage loan.

Strategies to Meet TDSR Requirements

If your TDSR exceeds 55%, your loan application may be rejected or the loan amount reduced. Here are strategies to bring your TDSR within limit:

1. Pay Down Existing Debts

Reducing credit card balances, personal loans, or car loans will immediately lower your monthly obligations and improve your TDSR.

2. Use a Co-Borrower

Adding a co-borrower with stable income can boost the gross monthly income used in TDSR calculation.

3. Extend the Loan Tenure

Longer tenure = lower monthly repayment = better TDSR. However, be mindful of MAS limits:

  • Max 30 years for HDB

  • Max 35 years for private property

  • Loan tenure + borrower’s age must not exceed 65 for full LTV

4. Choose a Lower-Priced Property

If you’re at the edge of your borrowing limit, consider a slightly cheaper property to reduce monthly loan obligations.

5. Consider Using CPF for Partial Payment

Reducing your loan quantum by increasing the downpayment through CPF can lower monthly instalments and improve TDSR.

6. Work with a Mortgage Broker

Mortgage loan brokers understand TDSR nuances and can help structure your application to improve approval chances across multiple banks.

TDSR Exemptions and Exceptions

There are limited exemptions from TDSR, mainly under refinancing scenarios.

TDSR Exemption for Refinancing:

You may be exempted from TDSR if you are refinancing an owner-occupied property and:

  • The property was purchased before TDSR implementation (before 29 June 2013), or

  • You are not increasing the loan amount during refinancing

This exemption allows borrowers facing tighter cash flow to refinance to a lower rate without failing the TDSR test.

Note: Exemptions do not apply to refinancing of investment properties.

TDSR and Investment Properties

TDSR rules apply strictly to investment properties, such as rental condos or commercial properties. Borrowers must pass the 55% threshold without exemption.

Also, banks apply additional stress buffers when calculating TDSR for investment purchases. They may use a higher assumed interest rate (e.g., 3.5% to 4%) to test loan serviceability.

Case Study: How TDSR Affects Loan Eligibility

Scenario:

  • Gross income: $8,000/month

  • Existing debt: $1,000/month (car loan)

  • Desired home loan: $1 million

  • Bank offers 3.2% interest, 30-year tenure

  • Monthly mortgage: ~$4,328

Total monthly debt = $1,000 + $4,328 = $5,328
TDSR = $5,328 ÷ $8,000 = 66.6%

This exceeds the 55% cap. The borrower has three options:

  1. Reduce property budget

  2. Increase downpayment to lower loan quantum

  3. Add a co-borrower to increase gross income

Required Documents to Verify TDSR

Banks require supporting documents to calculate your TDSR:

  • Income documents (payslips, CPF contributions, NOA)

  • Credit card statements

  • Personal loan statements

  • Car loan or hire purchase documents

  • Property loan statements (if owning other properties)

  • Rental income agreements (if used for TDSR)

Providing complete and accurate documentation helps ensure a faster approval process.

Tips for Managing Your TDSR

  1. Review Your Debt Portfolio Annually
    Consolidate high-interest loans and clear small debts where possible.

  2. Avoid Taking New Loans Before Applying for a Mortgage
    Even a small personal loan or credit card balance can reduce your loan eligibility.

  3. Use a Mortgage Affordability Calculator
    Many Singapore banks and mortgage brokers offer online tools that help estimate your TDSR and borrowing limit.

  4. Get an Approval in Principle (AIP)
    An AIP gives you clarity on how much loan you qualify for, so you can shop within your budget.

Conclusion

The Total Debt Servicing Ratio (TDSR) is a central pillar of Singapore’s responsible lending framework. Understanding how it works—and how it impacts your loan eligibility—is essential for anyone planning to buy a property or refinance an existing loan.

By keeping your debt obligations in check, planning your loan structure wisely, and providing accurate income documentation, you can comfortably pass the TDSR test and secure the financing you need for your dream home.

If you’re unsure about your TDSR standing or how much loan you can get approved for, consider working with a mortgage loan broker. Brokers can help calculate your borrowing limit, match you with the right banks, and streamline the entire home loan process—all at no additional cost to you.

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