Total Debt Servicing Rate (TDSR) - a Total Game Changer

In case you do not know what TDSR means for, it is a framework introduced by Singapore government in late June this year to further curb the property bubble by allowing 60% of total income to be served to pay the loan across all other loans such as car loans / personal loans etc.

This is probably the last and most effective action the government to take to curb the speculation of Singapore real estate market, with the cautious mindset to prevent the increasing interest rate in later year (2015/2015) that may hit Singapore economy.

Let me give you an example of how TDSR works:

Under this framework, all property loans must stay within 60 per cent of all monthly debt obligations to monthly gross income. Financial institutions must consider all outstanding debt obligations - such as property loans, car payments and credit card loans - in computing the TDSR, which also fixes interest rates at the higher of either the prevailing market interest rate or a specified medium term rate.

Imagine a family with a car loan S$2000, personal loan S$1,000 and gross income S$8K. Previously the family could take up to 35% of gross income which is S$2,800 mortgage loan. But with car loan and personal taken into consideration, now the family could take up to S$4,800 total debt or S$1,800 mortgage loan payment scheme. The family may now either to postpone the plan to upgrade the car or to reduce their budget on home purchase.

Hopefully by next year when the property price is stabilized, both my wife and I could consider to settle down here by purchasing a resale HDB with lower COV (but still with additional ABSD) thanks to this framework.

Source: http://www.businesstimes.com.sg/premium/top-stories/tdsr-game-changer-20131216