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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:

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)