What is TDSR?
TDSR is short for Total Debt Servicing Ratio, introduced by The Monetary Authority Of Singapore (MAS) for all property loans issued by Financial Institutions (FIs) with effect from 29 June 2013.
TDSR is basically
- < 60% of Total Income
Total debt obligations cannot exceed 60% of total income. This includes all liabilities such as credit card debts or even unpaid monthly bills, car loans, personal loans, student loans etc.).
- Variable Income cut by 30%
FIs are to evaluate all variable income ie. Business profits , rental income , commissions and bonuses as 30% less than it actually is. A landlord receiving rental income of $5000/month for his property will only have rental income of $3500/month put down on paper during TDSR calculations.
- Bye Bye to loan tenure tagged to younger borrower
FIs now use the “Income-weighted average age of borrowers” and not the age of the younger borrower to determine loan tenure.
- Higher Interest Rate
-Residential Properties 3.5%
-Non-residential Properties 4.5% , OR prevailing interest rates, whichever higher.
Who are hit the hardest?
- The main victims are buyers who are highly leveraged with servicing debts.
- Non-first time buyers.
- Buyers with variable income, ie. Salespeople, self-employed, or salaried men based mainly on bonuses.
Applying for a mortgage loan now involves piles of supporting documents required by FIs. And unlike previously, approval no longer takes mere days but 2-4 weeks.
One buyer of mine was asked to park $175k cash in a Fixed Deposit for 4 years in that bank, cancel all his credit cards just to borrow $300k!