If you are a self-employed, you would be wondering how does the Total Debt Servicing Ratio (TDSR) framework introduced by Monetary Authority of Singpore affects. Before purchasing the property, learn the guidelines and the steps to find the right mortgage loan.
TDSR haircut on self-employed income
Your declared income will be subjected to a 30% haircut or discount before subjected to assessment by banks. Say your taxable income is $100,000 last year, the bank will regard it as $70,000. This will reduce your borrowing limits.
30% MSR for HDB flats
For purchase of HDB flats regardless of BTO/ DBSS or resale, the monthly installments cannot exceed 30% of your gross monthly income. This rule is known as the Mortgage Servicing Ratio (MSR) and is applicable to HDB purchases only. Refer to this article for detailed explanation on the HDB mortgage servicing ratio.
Pledging of assets to boost income
MAS allows you to pledge assets that can be amortized over 4 years as income streams. Assets such as cash, stocks are recognized. Valuations of certain assets are recognized at 100% (meaning no haircut) while some are subjected to a 30% discount. If you choose to pledge less than 4 years, the discount is bigger resulting in a smaller income streams.
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