Total Debt Servicing Ratio (TDSR) - Unpledged 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 on my unpledged cash on hand?

Deposit Amount X 30%
___________________       =  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 30%
______________     =  $3,125/mth

     48 months


Based on TDSR, Mr Tan's commitment should not be more than:
$3,125 X 60% = $1,875
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 $1,410 +per month , across the banking industry, Bank will use $1,863.54 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 $415,000*, 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 based on him having no other commitment.


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