Total Debt Servicing Ratio (TDSR) – Singapore property for sale
The Monetary Authority of Singapore (MAS) will introduce a Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions (FIs) to individuals. This will require FIs to take into consideration borrowers’ other outstanding debt obligations when granting property loans. Singapore property for sale.
MAS will also refine rules related to the application of the existing Loan-to-Value (LTV) limits on housing loans – Singapore property for sale.
TDSR framework
The methodology for computing the TDSR will be standardised. FIs will be required to:
- take into account the monthly repayment for the property loan that the borrower is applying for plus the monthly repayments on all other outstanding property and non-property debt obligations of the borrower;
- apply a specified medium-term interest rate (3.5% for housing loans and 4.5% for non-residential property loans) or the prevailing market interest rate, whichever is higher, to the property loan that the borrower is applying for when calculating the TDSR;
- apply a haircut of at least 30% to all variable income (e.g. bonuses) and rental income; and
- apply haircuts to and amortise the value of any eligible financial assets taken into consideration in assessing the borrower’s debt servicing ability, in order to convert them into ‘income streams’ in computing the TDSR.
FIs will be required to verify and obtain relevant documentation on a borrower’s debt obligations and income used in the computation of the TDSR – Singapore property for sale.
MAS expects any property loan extended by the FI to not exceed a TDSR threshold of 60% and will regard any property loan in excess of a 60% TDSR to be imprudent.
Refinement of rules related to LTV limits
MAS will refine certain rules related to the application of the existing LTV limits on housing loans granted by FIs. In particular, MAS will require:
- borrowers named on a property loan to be the mortgagors of the residential property for which the loan is taken;
- “guarantors” who are standing guarantee for borrowers otherwise assessed by the FI at the point of application for the housing loan not to meet the TDSR threshold for a property loan to be brought in as co-borrowers; and
- in the case of joint borrowers, that FIs use the income-weighted average age of borrowers8 when applying the rules on loan tenure.
The new rules will take effect from 29 June 2013.
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