What is the Total Debt Servicing Ratio (TDSR) and how does it work?

Understanding the Total Debt Servicing Ratio (TDSR)

The Total Debt Servicing Ratio (TDSR) is a regulatory framework introduced by the Monetary Authority of Singapore (MAS) in June 2013. Its purpose is straightforward: to ensure that borrowers do not take on more debt than they can reasonably manage. It applies to all property loans granted by financial institutions in Singapore.

The 55% Threshold

Under the TDSR framework, a borrower's total monthly debt obligations must not exceed 55% of their gross monthly income. This includes the proposed mortgage instalment alongside all existing financial commitments - car loans, personal loans, revolving credit facilities, student loans, credit card debt, and any other outstanding property loan instalments.

The Stress-Test Rate

When assessing your TDSR, banks do not use your actual contracted mortgage rate. Instead, they apply a stress-test rate - the higher of 4% per annum or the loan's thereafter rate (the prevailing floating reference rate at the time of application plus the contractual spread) - to the proposed mortgage. This ensures that your loan remains serviceable even if interest rates rise significantly over the life of the loan.

How Income Is Calculated

The income figure used in your TDSR assessment depends on your employment type. Salaried employees use their gross monthly salary including regular allowances. Variable income components such as commissions, bonuses, and overtime are included at a 30% haircut, meaning only 70% of the 12-month average is counted. Self-employed individuals may use their assessed annual income from tax returns, divided by 12.

Rental income from existing properties can also be included, though MAS rules require a 30% haircut to account for vacancy risk and ongoing expenses. Some banks may apply additional internal discounts on top of this.

Exemptions

The most practically relevant exemption applies to owner-occupiers refinancing an existing residential property loan - they are not subject to the TDSR threshold, provided the new loan does not exceed the outstanding balance plus applicable penalty and legal fees. This allows homeowners to refinance even if their income or debt position has changed since they first took out the loan.

Why It Matters Before You Start Property Shopping

Knowing your TDSR position before you begin viewing properties saves considerable time and prevents the disappointment of pursuing homes you may not be able to finance. Cashew helps you calculate your TDSR accurately and determines the maximum loan amount you can qualify for, so you can search with clarity and confidence.