Mortgage Servicing Ratio (MSR) Framework
Mortgage Servicing Ratio (MSR) is the proportion of your monthly gross income that you can spend on mortgage repayments.
MSR = Monthly Mortgage Obligation / Gross Monthly Income x 100% ≤ 30%
What You Need To Know About Mortgage Servicing Ratio (MSR):
- A 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 Executive Condos 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%.
Bank Loan Applications
- A medium-term interest rate (currently 3.5%) 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 the borrower is a landlord), is taken at 70% of its value (need to submit stamped tenancy agreement with a minimum six months).
- Eligible financial assets (e.g. SGD Bank deposit), must be pledged with the bank for four years.
- The maximum loan tenure is 25 years (for HDBs) and 30 years (for ECs).
- There is a loan-to-value ceiling of 75%.
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%).
- There is a loan-to-value ceiling of 90%.
How Mortgage Servicing Ratio (MSR) Applied To Your Home Loan Situation?
| Monthly Gross Income | 30% MSR Limit |
| $5000 | $1500 |
The amount available to service your new monthly home loan repayments will be the difference between your other mortgage obligations and the MSR limit.
| Monthly Debt Obligations | Monthly Repayments |
| Other Mortgage Obligations | $0 |
| Total | $0 |
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% Mortgage Servicing Ratio (MSR)?
If your monthly home loan repayment and your other mortgage obligations surpass the 30% MSR, you’ve got several options:
