Impact & Implication of Total Debt
Servicing Ratio (TDSR) on Property Buyer
How will TDSR affect your loan
eligibility?
The Monetary Authority of
Singapore (MAS) imposed toughter rules on mortgage loans with
effect from 29 June 2013. Financial institutions are required to
consider outstanding property loans and other non-property debt
obligations such as car loans, credit card debts and other personal
loans of borrowers, before granting a new home loan. Borrower's
debt obligations must not exceed 60 per cent of his gross monthly
income.
This new scheme by MAS aims to tighten credit underwtiting
practices and encourage prudent borrowing among property buyers and
investors.
Variable Income Earners
Under this new framework, variable income earners will be among
those most affected. With a hair-cut of 30 per cent, those
dependent, bonuses and other forms of variable income, may have to
re-think their finanical standing and their property investment
strategy.
Lead Time For Bank Loan
Application
To process bank loan applications, financial insitutions will
require all bank statements and supporting documents of the
borrower prepared. This includes all personal loan, car loan,
credit card debt statements as well as commission or rent collected
(for variable income earners), among others.
Given the fluid nature of credit cards, how will banks assess
credit card loans as part of the borrower's debt obligations? With
this in mind, borrowers will need to consider the lead time
required for banks to internalize all paperwork and process the
loan application.
