Mortgage Servicing Ratio

What You Need To Know About Mortgage Servicing Ratio (MSR)

MSR is the proportion of your monthly gross income that can be spent on mortgage repayments.

• Long time ago: HDB-issued loans had an MSR cap of 40% of a borrower’s gross monthly income.
• January 2013: The MSR cap for HDB-issued loans was lowered to 35%. The MAS also set an MSR limit of 30% for bank-issued loans for HDB flats.
• August 2013: The MSR cap for HDB-issued loans was lowered to 30%.
• December 2013: The MSR cap of 30% was introduced for bank-issued loans for ECs bought directly from property developers.

Currently, all HDB-issued loans, and bank-issued loans for both HDB flats and ECs, have an MSR of 30%.

MSR = Monthly Mortgage Obligation / Gross Monthly Income x 100% ≤ 30%

Bank Loan Applications

• a medium-term interest rate (currently between 3 and 4%) is used to calculate the loan repayments,
• variable income, such as commission and performance-based bonuses, is taken at 70% of its value,
• rental income (if borrower is the landlord), is taken at 70% of its value (need to submit stamped tenancy agreement with minimum 6 months)
• eligible financial assets (e.g. SGD Bank deposit), must be pledged with the bank for four years, and
• the maximum loan tenure is 25 years (for HDBs) and 30 years (for ECs)
• there is a loan ceiling of 80%.

HDB Loan Applications

• the maximum loan tenure is 25 years, or not beyond the buyer’s age of 65 (whichever is shorter),
• the loan is calculated based on the HDB concessionary interest rate (prevailing CPF interest rate plus 0.1%), and
• there is a loan ceiling of 90%.

How MSR Applied To Your Home Loan Situation?

The amount available to service your new monthly home loan repayments will be the difference between your other mortgage obligations and the MSR limit.

In this case, you would have $1,500 to use towards your new home loan repayments. ($1,500 – $0 = $1,500)

What Happens If You Exceed the 30% MSR?

If your monthly home loan repayment and your other mortgage obligations surpass the 30% MSR, you’ve got several options:

• You can try to extend the loan tenure, so you can lower the monthly home loan repayment
• You can lower the property price quantum, so you can lower the amount you borrow
• You can increase the cash down-payment, so you can lower the amount you borrow
• You can sell or reduce the repayments on any other properties, so you can free up the monthly income to use towards your new home loan repayment