Unlike the Total Debt Servicing Ratio (TDSR), which applies to all housing loans, the Mortgage Servicing Ratio (MSR) in Singapore applies only to loans for HDB flats and Executive Condominiums (ECs).
The latest round of property cooling measures, announced on 29 September 2022, will see the medium-term interest rate floor used to compute the TDSR and MSR will be increased by 0.5%; from 3.5% to 4% for residential properties and 4.5% to 5% for non-residential properties. This means the final borrowing amount will be affected.
As with the TDSR, while the idea is straightforward in theory, but the HDB MSR becomes slightly more complicated in its application. Here is a guide on the MSR and how it affects you. Read on to find out more.
Mortgage Servicing Ratio (MSR) Overview
|What is the Mortgage Servicing Ratio (MSR)?||A rule that limits monthly repayments to 30% of the borrower’s gross monthly income.|
|Who is subject to the Mortgage Servicing Ratio (MSR)?||Those buying HDB flats (whether from HDB or on the resale market) and those buying executive condominium units (EC) from developers.|
|Does it apply to HDB loans and/or bank loans?||It does not matter whether you take an HDB or bank loan. As long as you buy an HDB flat or an EC from a developer, the Mortgage Servicing Ratio (MSR) applies.|
|Are there any Mortgage Servicing Ratio (MSR) exemptions?||Yes, the Mortgage Servicing Ratio (MSR) does not apply to the refinancing of loans for HDB flats and ECs that are owner-occupied, and that were purchased before 12 January 2013 (HDB flats) and 10 December 2013 (ECs).|
What Is Mortgage Servicing Ratio (MSR)?
If you’re planning to buy a property in Singapore, chances are you’ve heard of the Total Debt Servicing Ratio (TDSR), which states that only 55% of a borrower’s gross monthly income may be spent on debt repayments.
Less well-known, but just as important when it comes to qualifying for a loan, is the Mortgage Servicing Ratio (MSR) for HDB flats. As mentioned, the MSR only applies to HDB flats and ECs bought from the developer. The MSR caps the amount that may be spent on mortgage repayments to 30% of a borrower’s gross monthly income.
For example, if you earn $5,000 per month, your monthly home loan instalments cannot exceed 30% of that, which is $1,500.
History of The Mortgage Servicing Ratio (MSR) in Singapore
In long-ago times, the Mortgage Servicing Ratio, or MSR, was capped at 40% of a borrower’s gross monthly income. Then in January 2013, it was lowered to 35%. At the same time, the Monetary Association of Singapore (MAS) set an MSR limit of 30% for bank-issued loans for HDB flats.
In August of the same year, the MSR cap for HDB-issued loans was lowered again to 30%, bringing it into line with the banks. Then on 9 December, the same 30% MSR was introduced for loans issued by banks for ECs bought directly from property developers.
This means that now all HDB-issued loans, and loans issued by banks for both HDB flats and ECs, have an MSR of 30%.
How to Calculate Mortgage Servicing Ratio (MSR)
MSR is calculated by dividing a borrower’s monthly mortgage obligations (including debts secured by property) by total gross monthly income. In the case of joint borrowers, their total monthly mortgage obligations are divided by their total gross monthly income.
(Monthly repayment instalments for all property loans / Gross monthly Income) x 100% ≤ 30%
For convenience, PropertyGuru has a Mortgage Servicing Ratio or MSR calculator. Just indicate whether you’re making a single or joint application and fill up your income and deposit details, and the MSR calculator will work out your MSR limit.
Another useful tool we have is the Mortgage Affordability Calculator, which helps you with budgeting.
Estimate what you can comfortably spend on your new home
Other Factors to Take Note Of
When calculating the loan repayments, it’s worth reading the fine print below as well.
For Bank Loans:
- a medium-term interest rate (currently 4%) is used to calculate the loan repayments,
- variable income, such as commission and performance-based bonuses, is taken at 70% of its value,
- financial assets must be pledged with the bank for four years, and
- the maximum loan tenure is 30 years assuming the maximum Loan-to-Value ratio amount possible is to be borrowed.
For HDB Loans:
- the maximum loan tenure is 25 years, or 65 years minus the buyer’s age (whichever is shorter),
- the loan is calculated based on the HDB concessionary interest rate (prevailing CPF interest rate plus 0.1% – currently 2.6%), and
- there is a loan ceiling of 80%.
If the MSR comes out above 30%, the borrower can try extending the loan tenure, selling or reducing the repayments on any other properties, or reducing the amount borrowed by increasing the cash downpayment.
Mortgage Servicing Ratio (MSR) Exemptions
The MSR does not apply to the refinancing of loans for HDB flats and ECs that are owner-occupied, and that were purchased before 12 January 2013 (for HDB flats) and 10 December 2013 (for ECs purchased directly from a property developer).
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