TDSR and MSR: the two ratios that decide what you can actually buy

Almost every buyer arrives with the loan-to-value limit in mind: 75% on a first housing loan, so a $2M property needs $500,000. That calculation is usually irrelevant, because a second rule caps the loan lower, and it is the lower of the two that decides what you can buy.

The two ratios

Where both apply — an HDB flat or a developer EC — you must satisfy both, and MSR at 30% is usually the binding one. TDSR was tightened from 60% to 55% on 16 December 2021; loans granted before that date remain at 60% for refinancing purposes.

The stress test is the part people miss

The bank does not test your affordability against the rate it is offering you. It tests against a medium-term interest rate floor, which for residential property has been 4% per annum since 29 September 2022. Your actual package might be 2.6%. The assessment is done at 4%.

This is not bureaucratic caution. It is the difference between a household that survives a rate cycle and one that does not. On a $1.61M loan over 30 years, the monthly instalment at 2.8% is about $6,615. At 4% it is about $7,686 — $1,071 a month more, or nearly $13,000 a year, on the same loan.

What the numbers actually come to

A household on $14,000 a month with no other debt can borrow about $1.61M over 30 years. At a 75% loan-to-value that would support a purchase of roughly $2.15M — but only if they have the $537,000 downpayment and the $59,600 of stamp duty. If their equity is $500,000, the LTV limit never comes into play at all. Equity binds first for some households; income binds first for most.

The haircut on variable income

Commission, bonus, allowances and rental income are discounted by at least 30% before they count towards TDSR. Variable income is averaged over the preceding twelve months. Rental income requires a stamped tenancy agreement with at least six months left to run.

A household earning $14,000 of which $4,000 is commission is assessed on $12,800, not $14,000. Their maximum 30-year loan falls from about $1.61M to about $1.47M — a reduction of roughly $138,000 in borrowing power from the same headline income. For property agents, insurance advisers, business owners and anyone on a variable package, this is the single most important line in the assessment.

Eligible financial assets can be added as an income stream, amortised over 48 months, with their own haircuts: liquid Singapore-dollar assets count in full if pledged for at least four years, or at 30% if unpledged; other financial assets count at 70% if pledged and 30% if unpledged. This route is worth exploring for asset-rich, income-light borrowers, and is under-used.

Loan-to-value, and the trap in the tenure

If the numbers do not work

1. Clear existing debt. A car loan or a personal loan is usually worth more cleared than the interest saved suggests.
2. Extend the tenure — but check the loan-to-value consequence and your age at the final instalment before you do.
3. Add a guarantor or co-borrower whose income is recognised. This changes the ABSD position if they hold property, so map both effects together.
4. Pledge eligible financial assets, or use unpledged assets at the lower recognition rate.
5. Buy less. The least popular option and frequently the correct one — a household that clears TDSR at 54% has no margin for a rate reset or an income pause.