What you need to know about TDSR

By Gwendoline Tan

If you’ve only got a minute:

• TDSR is a measure that financial institutions use to ensure you can comfortably manage your loan repayments.
• It is a ratio of your total monthly debt obligations against your gross monthly income, expressed as a percentage.
• It encourages responsible borrowing, supports long-term sustainability in the market, and strengthens the credit underwriting practices of financial institutions.

Imagine a young couple, John and Mary, both in their 30s, eager to purchase their first home. With a combined monthly income of S$8,000, they are confident of their financial stability and decide to purchase an executive condominium priced at S$1.2 million.

In a world without any borrowing limits or affordability checks, they take out a maximum loan without fully considering their potential long-term financial commitments. But as life progresses, they start a family, buy a car, and the expenses start to creep up, putting the family under financial strain.

Despite having a healthy monthly household income, they may now be struggling to meet their monthly repayments and face the first-hand dangers of over-borrowing. This is precisely the scenario that the Singapore government aims to prevent.

To safeguard borrowers and maintain financial stability, the Monetary Authority of Singapore (MAS) introduced the total debt servicing ratio (TDSR) in 2013.

What is TDSR?

The TDSR is a measure that financial institutions use to ensure you can comfortably manage your loan repayments.

It is calculated by adding up all your monthly debt repayments and dividing that by your total monthly income before tax. The result is shown as a percentage which reflects how much of your income goes toward repaying your debts.

Currently, the TDSR limit is set at 55%.

In Singapore, the TDSR is particularly relevant given the high property prices, and significant role that real estate and mortgages play in household wealth. It is important to note that the TDSR limit is not fixed permanently. Regulators periodically review and adjust the threshold based on economic and property market conditions.

For example, the TDSR limit was 60% before December 2021. The government tightened it to 55% to help reduce rising household debt and to keep the housing market stable. This lower ratio means individuals now borrow a lower amount compared to their gross monthly income, encouraging more manageable borrowing. Staying updated on such changes can help you better manage your borrowing plans.

In the case of John and Mary, with their combined income, they may have qualified for a home loan comfortably under the TDSR limit. However, as their family grows and they consider what new expenses to take up, they must keep the 55% TDSR limit in mind. If they need to borrow further or refinance existing loans, they might have to first reduce some of their debt.

Read more: New property measures to curb rising home prices

What about MSR?

While the TDSR accounts for all your monthly debt obligations, the mortgage servicing ratio (MSR) applies specifically to property loan repayments in particular, only for HDB flats and executive condominiums where the minimum occupation period has not expired.

The MSR limits portion of your gross monthly income that can go toward mortgage repayments to 30%. Separate from the TDSR, this helps borrowers remain prudent when purchasing public housing.¹

Why is TDSR important?

The TDSR serves 3 main purposes, including ensuring that borrowers are not over-leveraged.²

1. Encourages responsible borrowing

TDSR helps individuals realistically assess their financial capacity, promoting careful budgeting. This encourages borrowers to plan wisely and avoid becoming overextended and causing financial strain.

If you have taken a loan to invest, this is also counted toward your monthly debt obligations under TDSR. This includes margin financing, or personal loans taken out to purchase investment products.

2. Supports long-term sustainability in the market

By limiting excessive borrowing and discouraging speculative buying, TDSR helps maintain a stable property market and reduces price volatility. This ensures that the property market grows sustainably over time.

3. Strengthens credit underwriting practices of financial institutions

TDSR reinforces sound credit practices among lenders, reducing the risk of widespread loan defaults that could impact banks and the broader economy. This helps maintain overall economic stability and supports growth.

How is it calculated?

Total monthly debt obligations

When you apply for a new loan, banks will review your credit records and ask for supporting documents to get a complete picture of your outstanding debts. This includes your current mortgage or home loan (including the new one you are applying for), car loans, student loans, renovation loans, credit card repayments, along with other regular loan repayments.

Read more: Why is my credit score important?

In calculating your home loan payment under the TDSR, banks use a “medium-term” interest rate. This is usually higher and more realistic than the current interest rate to provide a safety margin, considering the long-term nature of property loans and that interest rates fluctuate.

For example, in relation to residential property loans, this has a floor of 4% and can be higher depending on what the bank charges after any introductory or special rates end.

Gross monthly income

This is your pre-tax income, excluding any employer CPF contributions.

If you earn any variable income like commissions, bonuses, and allowances, as well as rental income, these amounts are reduced by at least 30% when calculating your TDSR. This is known as a “haircut”. The reason for this is so that you do not overborrow based on income that might fluctuate.

For variable income, banks take the average you have earned over the past 12 months. As for rental income, it must be supported by a valid tenancy agreement signed by both you and your tenant, with at least 6 months left on the lease.

In addition, certain eligible financial assets you own can be counted as income for TDSR purposes. But these are also subject to haircuts and must be spread out over a 48-month schedule before being included.

A simple breakdown

John has a gross monthly income of S$5,000 and an existing monthly car and student loan repayment of S$500 and S$300 respectively. This brings his total current monthly debt obligations to S$800.

Mary earns a gross monthly income of S$3,000 and has existing monthly debt repayments of S$700. Together, their total debt obligations amount to S$800 + S$700 = S$1,500, and their combined gross income is S$5,000 + S$3,000 = S$8,000.

Let’s take a look at how TDSR affects their loan eligibility.

Navigating TDSR

The implementation of TDSR has played a role in curbing speculative buying and cooling the rapid rise in property prices. However, the stricter lending rules have also made it more challenging for some first-time homebuyers to qualify for loans.

If you are looking to improve your TDSR and increase your borrowing capacity, there are several strategies to consider.  

One effective approach is to reduce your existing debts by paying down some of your outstanding loans, thereby lowering your total monthly debt obligations.

Banks commonly refer to your payslips when assessing your income. If you have any additional streams of income, like rental income or earnings from a side hustle, be sure to inform the bank and provide supporting documents.

While exploring new additional sources of income is another option, it is not easily attainable for everyone. Remember that variable income is subject to a 30% haircut, which may limit its impact on your TDSR.

Choosing a longer loan tenure can also help by lower your monthly repayments, making it easier to meet the TDSR requirements. However, keep in mind that this can increase the total interest paid over the life of the loan.

For joint loans, if your co-borrower has significant debt, it could increase the combined TDSR and reduce your borrowing capacity. In such cases, applying as a sole borrower may result in a more favourable TDSR.

When in doubt, seeking advice from financial professionals is always a wise move. They can provide personalised strategies to help you manage your debts effectively and strengthen your overall financial health.

Read more: 4 tips for buying your first home as a couple
Find out more about: DBS Home Marketplace

In conclusion

The TDSR is crucial in promoting responsible borrowing and helping to maintain financial stability in Singapore. By ensuring that individuals do not overextend themselves financially, it protects not only borrowers but also the broader economy from the risks of excessive debt.

Understanding how TDSR is calculated empowers you to better manage your debt ratios, make informed borrowing decisions, and ultimately achieve greater financial security.

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Source:
¹Monetary Authority of Singapore, “Rules for New Housing Loans”, retrieved 26 May 2025.

²Monetary Authority of Singapore, “Total Debt Servicing Ratio for Property Loans”, retrieved 26 May 2025.

³Monetary Authority of Singapore, “Total Debt Servicing Ratio for Property Loans, Calculating TDSR”, retrieved 26 May 2025.

Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.