Total Debt Servicing Ratio (TDSR) - Pledged Deposit

What is TDSR ?

Total Debt Servicing Ratio ( TDSR ) is a debt servicing measure that Bank/Financial Institution used to determine if the potential borrower is overly geared with debts.

How to compute TDSR?

Based on the newest measure, TDSR should not be more than 60%

Monthly Total Debt Obligations  
_________________________       <      60%

       Gross Monthly Income

Monthly Total Debt Obligation consist of:
1)  Existing Housing Loan Installment
2)  Car loan Installment
3)  Personal Loan Installment
4)  Overdraft Loan Repayment
5)  Credit card etc

How to determine monthly income based if I were to pledge my cash with the bank for 48months?

Deposit Amount X 70%
___________________       =  Monthly Income

        48 months


Example:
Mr Tan ,aged 34 , has $500k in a Local bank but he is not working

Gross monthly income will be compute as:

$500,000 X 70%
______________     =  $7291.66/mth

     48 months


Based on TDSR, Mr Tan's commitment should not be more than:
$7291.66 X 60% = $4,374.99

Car Loan: $850/mth

Mr Tan will only be left with $3,524.99

Stress Test
Newly Purchase Monthly Installment will be computed based on a standard rate of 3.5% (Introduce by MAS) for residential property to access customer debt repayment ability


Although Mr Tan might be paying only $2,700 +per month , across the banking industry, Bank will use $3,520.51 to calculate on Mr Tan's debt repayment ability.

 

Assuming that Mr Tan do not have any other commitment, the maximum loan that he is able to obtain based on 80% loan will be $784,000*, 30 years loan tenor.

*Do take note that  there are some bank which take into consideration of credit card minimum payment as a commitment. The above example is compute purely based on his car loan.


If you have any question unsolved, you can either get me via my Mobile at 9 1 7 6 7 9 7 0 or email me at den@housingmatters.com.sg or even drop a comment below :

Den Ng
Housing Matters
http://www.housingmatters.com.sg