TDSR Explained: How It Affects Your Mortgage Eligibility in Singapore

Executive Summary

The Total Debt Servicing Ratio (TDSR) is the single most important factor determining how much you can borrow for a home loan in Singapore. Introduced by the Monetary Authority of Singapore (MAS) in 2013, the TDSR limits your total monthly debt repayments to 55% of your gross monthly income. This means if you earn S$10,000 per month, your maximum total debt obligations cannot exceed S$5,500. Understanding TDSR is essential for first-time buyers, upgraders, and investors because it directly impacts your mortgage eligibility and purchasing power.

At Homejourney, we believe that informed borrowers make better decisions. This comprehensive guide explains TDSR in detail, shows you exactly how it's calculated, reveals common mistakes that cost borrowers hundreds of thousands of dollars, and provides actionable strategies to maximize your borrowing capacity. Whether you're planning to buy your first HDB flat, upgrading to a private property, or refinancing an existing loan, this guide will equip you with the knowledge to navigate Singapore's mortgage landscape with confidence.

What Is TDSR and Why Does It Matter?
TDSR vs MSR: Understanding the Difference
How TDSR Is Calculated: Step-by-Step
TDSR Limits and Borrowing Capacity
Income Types and TDSR Haircuts
Which Debts Count Toward Your TDSR?
Real-World TDSR Calculation Examples
TDSR Rules: HDB vs Private Property
How to Improve Your Mortgage Eligibility
Common TDSR Mistakes That Cost Borrowers Money
Frequently Asked Questions
Your Next Steps with Homejourney

What Is TDSR and Why Does It Matter?

The Total Debt Servicing Ratio (TDSR) is a regulatory measure that caps the total amount you can borrow based on your income. Specifically, it limits your total monthly debt repayments to a maximum of 55% of your gross monthly income. This regulation applies to all new loans in Singapore, including mortgages, car loans, personal loans, and credit card balances.

The MAS introduced TDSR in 2013 to prevent over-leveraging among borrowers and to maintain financial stability in the Singapore economy. Before TDSR existed, some borrowers took on excessive debt relative to their income, leading to financial distress when interest rates rose or income declined. By capping debt servicing at 55% of gross income, the government ensures that borrowers retain sufficient income for living expenses, savings, and unexpected emergencies.

For property buyers, TDSR is particularly critical because property loans are typically the largest debt obligation. A single miscalculation in your TDSR can reduce your borrowing capacity by hundreds of thousands of dollars, making the difference between affording your dream property and being rejected for a loan.

TDSR vs MSR: Understanding the Difference

Many borrowers confuse TDSR with MSR (Mortgage Servicing Ratio), but they serve different purposes and apply in different situations. Understanding the distinction is crucial for accurate mortgage planning.

TDSR (Total Debt Servicing Ratio) applies to all borrowers and all property types. It caps your total monthly debt obligations—including mortgages, car loans, personal loans, credit card payments, and student loans—at 55% of your gross monthly income. TDSR is a comprehensive measure of your total debt burden.

MSR (Mortgage Servicing Ratio) applies specifically to mortgage payments on HDB flats and Executive Condominiums (ECs) during the Minimum Occupation Period (MOP). MSR caps mortgage payments alone at 30% of your gross monthly income. This means even if you have no other debts and could theoretically borrow 55% under TDSR, you can only allocate 30% of your income to mortgage payments for HDB and EC purchases.

Here's a practical example: If you earn S$6,000 per month and have no other debts, your TDSR limit allows you to borrow enough to pay S$3,300 monthly (55% of S$6,000). However, if you're buying an HDB resale flat, the MSR limit restricts your mortgage payment to only S$1,800 (30% of S$6,000). In this case, MSR is the binding constraint, not TDSR.

For private property purchases, only TDSR applies—there is no MSR restriction. This is one reason why private property buyers often have higher borrowing capacity than HDB buyers with the same income.

How TDSR Is Calculated: Step-by-Step

TDSR calculation involves three key components: determining your eligible gross monthly income, calculating your total monthly debt obligations, and dividing the latter by the former. Let's break down each step.

Step 1: Calculate Your Eligible Gross Monthly Income

Your eligible income includes your base salary, bonuses, allowances, and any other regular income. Importantly, this is your pre-tax income, excluding employer CPF contributions. If you have variable income (commissions, bonuses, rental income), banks apply a 30% reduction called a "haircut" to account for income volatility.

For variable income, banks typically average your earnings over the past 12 months, then apply the 30% haircut. For rental income, you must provide a valid tenancy agreement with at least 6 months remaining on the lease. Certain eligible financial assets can also be counted as income, but these are subject to haircuts and spread over a 48-month amortization schedule.

Step 2: Identify All Monthly Debt Obligations

Banks will review your credit records and request documentation to identify all outstanding debts. These include your current mortgage (if refinancing), car loans, personal loans, credit card balances, student loans, renovation loans, and any other regular loan repayments. Banks also count the minimum monthly payment on credit card balances and interest-free installment plans.

Step 3: Calculate Your TDSR Ratio

The formula is straightforward:

TDSR = (Total Monthly Debt Obligations ÷ Eligible Gross Monthly Income) × 100%

Your TDSR must be ≤ 55%. If your calculated ratio exceeds 55%, you will not qualify for the full loan amount you're seeking. Banks may offer a smaller loan that brings your TDSR within acceptable limits, or they may decline your application entirely.

Step 4: Banks Apply a "Medium-Term" Interest Rate

When calculating your mortgage payment for TDSR purposes, banks don't use the current interest rate. Instead, they use a "medium-term" interest rate that is typically higher than current rates. For residential property loans, this floor is usually 4% but can be higher depending on the bank's assessment. This conservative approach protects borrowers if interest rates rise during the loan tenure.

TDSR Limits and Borrowing Capacity

The TDSR limit of 55% was tightened from 60% in December 2021 as part of government efforts to cool the property market and reduce household debt. This change had a significant impact on borrowing capacity across Singapore.

The Impact of the 55% TDSR Limit

The reduction from 60% to 55% means borrowers can now allocate 5 percentage points less of their income to debt servicing. For a borrower earning S$10,000 monthly, this represents a reduction from S$6,000 to S$5,500 in maximum monthly debt obligations—a difference of S$500 per month or S$6,000 annually.

Over a 30-year mortgage, this seemingly small reduction can translate to a borrowing capacity decrease of S$100,000 or more, depending on interest rates. For property buyers in Singapore's competitive market, this reduction has made it more challenging to qualify for the loan amounts needed to purchase properties at current price levels.

Historical Context and Future Changes

The TDSR limit is not permanently fixed. Regulators periodically review and adjust the threshold based on economic conditions and property market dynamics. The 2021 tightening from 60% to 55% demonstrates that the government is willing to adjust TDSR to manage systemic risks. Future changes could occur if property prices accelerate significantly or if household debt levels become concerning.

Staying informed about potential TDSR changes is important for long-term financial planning. Subscribe to updates from the Monetary Authority of Singapore and monitor announcements from the Ministry of Finance for any regulatory adjustments that could affect your borrowing capacity.

Income Types and TDSR Haircuts

Not all income is treated equally under TDSR calculations. Banks apply different haircuts (reductions) to various income types to account for volatility and uncertainty.

Stable Employment Income (No Haircut)

If you're a salaried employee with a stable job, your gross monthly salary is counted at full value with no haircut. This includes your base salary, fixed allowances, and any guaranteed bonuses. Banks typically require 2-3 months of recent payslips and an employment letter confirming your position and salary.

Variable Income (30% Haircut)

If your income includes variable components like commissions, performance bonuses, or overtime, banks apply a 30% haircut. This means only 70% of your variable income is counted toward your eligible income. Variable income typically applies to:

Insurance agents and financial advisors
Property agents and real estate professionals
Sales representatives working on commission
Freelancers and consultants
Business owners and self-employed individuals

To qualify variable income, banks typically require 2 years of tax returns or audited financial statements demonstrating consistent income history. They average your income over the past 12 months, then apply the 30% haircut.

Rental Income (30% Haircut)

If you own rental properties, the rental income can be counted toward your eligible income, but it's subject to a 30% haircut. Additionally, you must provide a valid tenancy agreement signed by both you and your tenant, with at least 6 months remaining on the lease. Banks will typically verify the rental income against your tax returns.

Financial Assets as Income (30-50% Haircut)

Certain eligible financial assets can be counted as income for TDSR purposes, but they're subject to haircuts of 30-50% depending on the asset type. These assets are amortized over a 48-month schedule, meaning the asset value is spread over 4 years to calculate monthly income. This approach is rarely used by typical borrowers but may benefit high-net-worth individuals with significant investment portfolios.

Real Example: Impact of Income Haircuts

Consider two borrowers earning the same total income but with different income composition:

Borrower A: Salaried employee earning S$8,000 monthly. Eligible income = S$8,000 (no haircut)
Borrower B: Insurance agent with S$5,000 base salary + S$3,000 commission. Total = S$8,000, but eligible income = S$5,000 + (S$3,000 × 70%) = S$7,100 (30% haircut on commission)

Despite earning the same S$8,000 total, Borrower A can borrow based on S$8,000 eligible income, while Borrower B can only borrow based on S$7,100. This 12.5% difference in eligible income translates to a significant reduction in borrowing capacity.

Which Debts Count Toward Your TDSR?

Understanding which debts are included in your TDSR calculation is critical because every debt reduces your borrowing capacity. Banks take a comprehensive view of your financial obligations.

Debts Included in TDSR Calculation

Mortgages: Your current home loan or any new mortgage you're applying for
Car Loans: Monthly payments on vehicle financing
Personal Loans: All outstanding personal loan obligations
Credit Card Balances: Minimum monthly payments on all credit cards
Interest-Free Installment Plans: "Buy now, pay later" schemes and interest-free credit arrangements
Student Loans: Education loans and any outstanding student financing
Renovation Loans: Home improvement financing
Overdrafts: Any approved overdraft facilities
Other Loan Obligations: Any other regular debt repayments

Debts NOT Included in TDSR

Interestingly, some financial obligations are not counted toward TDSR, even though they represent real expenses:

Utility bills and household expenses
Insurance premiums
Rental payments (unless you're calculating rental income from a property)
CPF contributions (though these reduce your take-home income)
Income taxes

This distinction is important because it means your TDSR can technically be within limits even if your total monthly expenses exceed 55% of your gross income. However, this doesn't mean you can afford the mortgage—it simply means you meet the regulatory requirement.

Credit Card Balances: A Hidden TDSR Killer

Many borrowers underestimate the impact of credit card balances on TDSR. Banks count the minimum monthly payment on your credit card balance, not just the interest charges. If you have S$50,000 in credit card debt at a 3% minimum payment rate, that's S$1,500 per month counting toward your TDSR—even if you're paying it down.

This is why financial advisors recommend paying down credit card balances before applying for a mortgage. Reducing credit card debt directly increases your available TDSR capacity and can unlock significantly higher borrowing power.

Real-World TDSR Calculation Examples

Let's work through detailed examples to show how TDSR calculations work in practice. These scenarios reflect common situations faced by Singapore property buyers.

Example 1: First-Time Buyer with Stable Income and No Existing Debts

Borrower Profile: Alicia is a 28-year-old software engineer earning S$7,000 monthly. She has no car loan, no personal loans, and minimal credit card balance (paid in full monthly). She's applying for her first HDB flat.

Calculation:

Gross Monthly Income: S$7,000
Existing Monthly Debt Obligations: S$0 (no debts)
TDSR Available: 55% × S$7,000 = S$3,850
Maximum Mortgage Payment (TDSR): S$3,850
MSR Limit (HDB): 30% × S$7,000 = S$2,100

Analysis: For Alicia's HDB purchase, MSR is the binding constraint. She can only allocate S$2,100 to her mortgage payment, even though TDSR would allow S$3,850. At a 4% interest rate over 30 years, a S$2,100 monthly payment translates to approximately S$390,000 in borrowing capacity (before down payment considerations).

Example 2: Property Upgrader with Existing Debts

Borrower Profile: Marcus and his wife Sarah have combined monthly income of S$12,000. They have an existing car loan of S$800/month and credit card balances totaling S$1,200/month in minimum payments. They're upgrading from an HDB to a private condo.

Calculation:

Combined Gross Monthly Income: S$12,000
Existing Monthly Debt Obligations: S$800 (car) + S$1,200 (credit cards) = S$2,000
TDSR Available: 55% × S$12,000 = S$6,600
Available for New Mortgage: S$6,600 - S$2,000 = S$4,600
Maximum Mortgage Payment: S$4,600

Analysis: Marcus and Sarah's existing debts consume S$2,000 of their TDSR capacity, leaving only S$4,600 for their new mortgage. If they paid off their credit card balance before applying (S$1,200/month savings), their available mortgage capacity would increase to S$5,800—a 26% increase in borrowing power.

Example 3: Self-Employed Borrower with Variable Income

Borrower Profile: David is a management consultant with highly variable income. Over the past 12 months, he earned S$60,000 in total income (S$5,000 monthly average). He has a personal loan with S$500 monthly payments and credit card minimum payments of S$300/month.

Calculation:

Average Monthly Income (past 12 months): S$5,000
Income After 30% Haircut: S$5,000 × 70% = S$3,500
Existing Monthly Debt Obligations: S$500 (personal loan) + S$300 (credit cards) = S$800
TDSR Available: 55% × S$3,500 = S$1,925
Available for New Mortgage: S$1,925 - S$800 = S$1,125

Analysis: David's variable income status significantly reduces his eligible income from S$5,000 to S$3,500 due to the 30% haircut. His existing debts further reduce his mortgage capacity to just S$1,125 monthly. To improve his borrowing capacity, David should focus on: (1) demonstrating more consistent income history, (2) paying down his personal loan and credit card balances, and (3) documenting his income with 2 years of tax returns.

Example 4: Refinancing Scenario

Borrower Profile: Jennifer owns an HDB flat with an existing mortgage payment of S$1,500/month and is refinancing to a lower rate. She earns S$6,000 monthly and has no other debts.

Calculation:

Gross Monthly Income: S$6,000
Existing Monthly Debt Obligations: S$1,500 (current mortgage)
TDSR Available: 55% × S$6,000 = S$3,300
Available for New Debt: S$3,300 - S$1,500 = S$1,800

Analysis: Here's the critical point: Jennifer is refinancing her existing mortgage, not taking on new debt. Since September 2016, owner-occupants refinancing HDB mortgages have been exempted from TDSR rules. Jennifer only needs to meet the bank's standard credit assessment—her TDSR is not a limiting factor. This exemption makes refinancing an attractive option for borrowers seeking better rates.

TDSR Rules: HDB vs Private Property

The TDSR rules apply uniformly across all property types, but the interaction with MSR creates different constraints for HDB and private property purchases. Understanding these differences is crucial for buyers evaluating their options.

HDB Resale Flats and Executive Condominiums

For HDB resale flats and ECs, both TDSR and MSR apply simultaneously. MSR caps mortgage payments at 30% of gross income, which is often more restrictive than TDSR's 55% limit on total debt. This means your borrowing capacity for HDB purchases is typically limited by MSR, not TDSR.

Additionally, HDB has its own loan eligibility criteria separate from TDSR, including age limits, citizenship requirements, and property value caps. For detailed information on HDB loan eligibility, consult the HDB website or speak with an HDB-approved bank.

Private Residential Properties

For private property purchases, only TDSR applies—there is no MSR restriction. This means you can theoretically allocate up to 55% of your gross income to mortgage payments (subject to TDSR limits on total debt). Private property buyers typically have higher borrowing capacity than HDB buyers with the same income, assuming similar debt obligations.

However, private property loans often come with stricter bank credit requirements, higher interest rates, and more conservative lending practices compared to HDB loans. Banks may also impose their own internal borrowing limits that are more restrictive than TDSR.

Commercial and Investment Properties

TDSR applies to investment property loans as well, though some banks may apply stricter criteria. Banks typically count investment property rental income at a lower rate and may require higher down payments. Some banks also limit the number of investment properties you can finance or impose additional TDSR restrictions for investment portfolios.

How to Improve Your Mortgage Eligibility

If your current TDSR limits your borrowing capacity below your target property price, don't despair. There are concrete, actionable steps you can take to improve your eligibility.

Strategy 1: Pay Down Existing Debts

This is the most direct and fastest way to improve your TDSR. Every dollar of debt you eliminate increases your available TDSR capacity dollar-for-dollar. Prioritize high-impact debts:

Credit Card Balances: Paying off S$10,000 in credit card debt at 3% minimum payment saves S$300/month in TDSR consumption
Personal Loans: Accelerating payoff of personal loans directly frees up TDSR capacity
Car Loans: If you're planning to purchase a property within 2-3 years, consider delaying a car purchase or paying down an existing car loan

Many borrowers successfully improve their TDSR by 5-10 percentage points through aggressive debt paydown in the 6-12 months before applying for a mortgage.

Strategy 2: Increase Your Income

If you have variable income components (bonuses, commissions, overtime), demonstrating consistent income growth can improve your eligible income. Document your income carefully with 2 years of tax returns and recent payslips. Some borrowers also benefit from spousal income if they're married—combining household income increases your TDSR capacity proportionally.

If you're self-employed, maintaining meticulous financial records and showing consistent profitability helps banks assess your income more favorably. Consider engaging an accountant to optimize your financial documentation.

Strategy 3: Include Co-Borrowers

If you're single, adding a spouse or family member as a co-borrower increases your combined household income and TDSR capacity. If you're already married, ensure both spouses' incomes are included in the application. Some borrowers also add parents or adult children as co-borrowers, though this requires careful consideration of future liability implications.

Strategy 4: Extend Your Loan Tenure

While extending your loan tenure from 25 years to 30 years increases your total interest paid, it reduces your monthly mortgage payment, which improves your TDSR ratio. However, this strategy should be used cautiously because it increases your lifetime cost significantly.

Strategy 5: Choose a Lower-Priced Property

Sometimes the most practical solution is to adjust your property target. A property S$100,000 lower in price might be well within your TDSR capacity, whereas your original target requires debt paydown or income increases. Consider whether a smaller or older property in a different location might meet your needs while fitting your budget.

Strategy 6: Wait and Plan Ahead

If you're not in a rush to purchase, use the next 12-24 months strategically to improve your TDSR position. Focus on debt paydown, income growth, and building savings for a larger down payment. Many borrowers find that waiting 18-24 months and implementing these strategies improves their borrowing capacity by 20-30%.

Strategy 7: Use Homejourney's Mortgage Eligibility Calculator

Homejourney's mortgage eligibility calculator helps you model different scenarios instantly. You can see exactly how paying down S$5,000 in credit card debt, increasing your income by S$500/month, or extending your loan tenure affects your borrowing capacity. This modeling helps you prioritize which strategies will have the biggest impact on your specific situation.

Access the calculator at Bank Rates to run unlimited scenarios and find your optimal path to mortgage approval.

Common TDSR Mistakes That Cost Borrowers Money

After helping thousands of borrowers navigate the mortgage process, we've identified recurring mistakes that significantly impact borrowing capacity and approval chances. Learning from these mistakes can save you hundreds of thousands of dollars.

Mistake 1: Ignoring Credit Card Balances

The single most common mistake is underestimating the impact of credit card debt on TDSR. Borrowers often think, "I'll pay off my credit card after I get the mortgage," but this strategy backfires. Banks count credit card minimum payments in your TDSR calculation, reducing your borrowing capacity immediately.

A borrower with S$50,000 in credit card debt at 3% minimum payment (S$1,500/month) loses S$1,500 of TDSR capacity. Over a 30-year mortgage at 4% interest, this represents approximately S$280,000 in lost borrowing power. The solution: pay off credit cards before applying for a mortgage.

Mistake 2: Applying for New Loans Before Mortgage Application

Some borrowers make the mistake of taking out a new car loan or personal loan just before applying for a mortgage. This immediately increases their debt obligations and reduces their TDSR capacity. Even worse, the new loan inquiry appears on their credit report, potentially affecting their credit score.

If you're planning to purchase a property within 12 months, avoid taking on any new debt. If you need a car, delay the purchase until after your mortgage is approved and funded.

Mistake 3: Not Documenting Variable Income Properly

Self-employed borrowers and those with variable income often fail to document their income properly, leading to rejection or lower loan amounts. Banks require 2 years of tax returns or audited financial statements for variable income. If your documentation is incomplete or shows inconsistent income, banks will either reject your application or apply more conservative haircuts.

Solution: Work with an accountant 12-24 months before applying to ensure your financial records are clean, consistent, and well-documented.

Mistake 4: Calculating TDSR Incorrectly

Many borrowers attempt to calculate their own TDSR and make errors in the process. Common mistakes include:

Using take-home income instead of gross income
Forgetting to include all debts (especially credit cards and interest-free installments)
Not applying the 30% haircut to variable income
Using current mortgage rates instead of the bank's "medium-term" rate

Rather than risking calculation errors, use Homejourney's mortgage eligibility calculator, which accounts for all these factors automatically.

Mistake 5: Not Comparing Banks and Rates

Different banks have slightly different lending criteria and interest rates. Some banks are more lenient on TDSR calculations, while others are stricter. Applying to only one bank means you might miss better terms or higher approval amounts from competitors.

Homejourney's Bank Rates page allows you to compare rates from DBS, OCBC, UOB, HSBC, Standard Chartered, and other major banks in one place. You can also submit one application and receive offers from multiple banks, helping you identify which bank offers the best terms for your specific situation.

Mistake 6: Applying During Income Transition

Borrowers who change jobs, move to commission-based roles, or experience income changes often apply for mortgages during the transition period. Banks typically require 3-6 months of consistent income at your new level before counting it toward your eligible income. Applying too early means your new income won't be fully recognized.

If you're changing jobs or income sources, wait 6 months before applying for a mortgage to allow your new income to be fully documented and recognized.

Mistake 7: Overlooking Spousal Income

Married borrowers sometimes apply as individuals instead of joint applicants, missing the opportunity to include their spouse's income. This is particularly costly if the spouse has stable, high income. Joint applications significantly increase borrowing capacity and approval chances.

Always apply jointly if you're married, even if one spouse will be the primary borrower.

Frequently Asked Questions About TDSR and Mortgage Eligibility

Q: What is the current TDSR limit in Singapore?

A: The current TDSR limit is 55% of gross monthly income. This limit was reduced from 60% in December 2021 as part of government efforts to manage household debt and maintain financial stability. The TDSR limit is subject to periodic review and adjustment based on economic and property market conditions.

Q: Does TDSR apply to refinancing?

A: TDSR exemptions apply to owner-occupants refinancing their HDB mortgages. Since September 2016, HDB owner-occupants refinancing their existing mortgages are exempt from TDSR rules and only need to meet the bank's standard credit assessment. However, TDSR still applies to refinancing of private property mortgages and to new property purchases.

Q: How is rental income counted in TDSR?