The Different Between MSR & TDSR?

What is MSR?

MSR denotes Mortgage Servicing Ratio which is used for loan calculation for HDB direct or resales purchase when you are applying for HLE (HDB loan).

It is based on 30% of the buyer(s) gross monthly income. Buyers whose income has variable component will have a additional 30% cut to their income to derive the figure for loan amount calculation. Let’s illustrate further by using the example below.

Example 1:
Single buyer planning to buy a HDB flat in Bukit Merah.

Buyer A earn a gross income of $5,000 per month.

MSR calculation:
$5,000 x 30% = $1,500.00

And therefore, $1,500 will be the disposable income that can be use to derive the maximum loan the buyer can get. $1,500 is also the mortgage repayment amount if the buyer is planning to maximize the loan amount.

Using the mortgage loan calculator the maximum loan amount for 30 years loan tenure at 3.5% interest rate will be $334,042.

Example 2:
Couple planning to buy a HDB flat in Queenstown under the fiance and fiancee scheme.

Buyer A earn a gross income of $5,000 per month.

Buyer B earn a gross income of $5,000 per month. Which $2,500 is variable income (commission). Therefore the calculation will be as such.

Buyer A MSR calculation:
$5,000 x 30% = $1,500.00

Buyer B MSR calculation:
$2,500 (fixed income) x 30% = $750
$2,500 (variable income) – 30% = $1,750 x 30% = $525.00
$750 + $525 = $1,275.00

So total disposable income for loan amount calculation will be $1,500 + $1,275 = $2,775.00.

Using the mortgage loan calculator the maximum loan amount for 30 years loan tenure at 3.5% interest rate will be $617,978.

What is TDSR?

TDSR denote Total Debt Servicing Ratio is used for loan calculation when buyer are buying property with bank loan. The property can be any residential properties including HDB.

Example 3:
Buyer C earn a gross income of $5,000 per month. TDSR calculation will be = $5,000 x 60% = $3,000.00

And therefore, $3,000 will be the disposable income that can be use to derive the maximum loan the buyer can get. $3,000 is also the mortgage repayment amount if the buyer is planning to maximize the loan amount.

But it doesn’t stop there for TDSR. TDSR will also consider your other monthly liability commitment, like car loan, credit card and etc. So the amount of $3,000 will need to deduct accordingly.

Example: $3,000 – $900 (car loan) – $150 (credit cards x 3)* = $1,950

Using the mortgage loan calculator, the maximum loan amount for 30 years loan tenure at 3.5% interest rate will be $434,255.

*every credit card bank will minus $50 from the calculation as minimum amount to pay for credit card bill is usually $50.00

Case Study

So we have covered the basic of MSR and TDSR differences. Let dive in deeper using case study for easier understanding.

In the case of MSR calculation for HDB purchase. If there is car loan and any other loan(s) involved, it will be based on TDSR or MSR whichever is lower.

Continuing from example 2 to further elaborate the point above.

Assuming Buyer A has a monthly repayment for car loan of $1,700.00. And Buyer B has a monthly repayment for study loan of $1,500.00.

Buyer A TDSR calculation = $5,000 x 60% = $3,000.00 – $1,700 (car loan) = $1,300

Buyer B TDSR calculation:
$2,500 (fixed income) x 60% = $1,500.00
$2,500 (variable income) – 30% = $1,750 x 60% = $1,050.00.

$1,500 + $1,050 = $2,550 – $1,500 (study loan) = $1,050.00

So total disposable income for TDSR will be $1,300 + $1,050 = $2,350.00.

As you can see, total MSR was $2,775.00. And total TDSR was $2,350.00. As the figure for TDSR is lower, the final figure to use will be $2,350 for the max loan calculation.

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