MSR Requirement Now Applicable to EC
How are Home Owners coping with TDSR & MSR when applying for Housing Loans?
It is about four months since the new measures to standardize banks’ debt service calculation when granting property loans were introduced on 29 June 2013.
To recap, the 2 debt service calculations are:-
(1) Total Debt Servicing Ratio (TDSR) < 60%
Total monthly payments on all loan payments including new property loan must not exceed 60% of total gross income
(2) Mortgage Service Ratio (MSR) < 30% (applicable to HDB flat only)
Total monthly payment on HDB loan must not exceed 30% of total gross income
Learn more about TDSR and MSR.
It is evident that during the past few months, the new debt servicing policy has affected certain groups of property buyers/owners more than others. Let’s look at the ‘after-effects’ felt by the affected groups:
MAS New Debt Servicing Framework on Property Loans
The new policy by MAS, which took effect on 29 Jun 2013, imposes a new lending framework on banks when granting property loans, thereby standardizing the broad lending guidelines among all banks.
The new measure applies to all property loans granted to individuals, sole-proprietorship, investment holding companies set by individuals solely to buy properties, whether for purchase or refinancing. The properties cover both residential and non-residential properties located in Singapore and overseas.
The new measure includes:
(a) Total Debt Service Ratio not more than 60%
A person's total monthly debt repayment cannot exceed 60% of the gross monthly income
Monthly Total Debt Obligations X 60%
Gross Monthly Income (excl CPF Contribution by Employer)