Should You Borrow More? Total Debt Servicing Ratio and Your Housing Loan



Share on facebook
Share on email
Share on whatsapp

How much will you get for your housing loan? For aspiring homeowners, the answer is a crucial part of financial planning. The loan amount can be a deal-breaker for a lot of first-time homebuyers.

Often, you are not quite sure if it’s better to apply for a smaller or bigger loan. That’s why it is imperative to understand whether you are ready to take a leap towards this milestone. Know the factors to consider when buying your dream home.

Our answer?

It’s Better to Get a Smaller Housing Loan Amount

You can save interest rates on your HDB housing loan by minimising the loan amount.

Aside from taking a smaller loan amount from the start, you can also make partial capital repayment when you have the funds.

How do you save when taking a smaller housing loan amount?

Let’s look at an example scenario of taking a $250,000 versus $200,000 loan amount.

Let’s say the loan tenure is 25 years at 2.6% interest:

$250,000 loan

  • Monthly payment – $1,135
  • Total payment over 25 years – $340,500
  • Total amount of interest paid – $90,500

$200,000 loan

  • Monthly payment – $908
  • Total payment over 25 years – $272,400
  • Total amount of interest paid – $72,400

The interest savings that you get from getting the smaller loan is $18,100.

This amount is more than enough for a kitchen makeover of your love nest.

You need to be strategic about the home financing. Just because you can afford the monthly repayment, it does not mean that you should get the maximum loan amount available. Apparently, this is the same line of thinking by the government, which has implemented measures to encourage financial prudence among borrowers.

How does the government ensure financial prudence?

The Monetary Authority of Singapore (MAS) sets a maximum threshold for borrowers, which is the Total Debt Servicing Ratio (TDSR).

Financial institutions (FI) must compute the TDSR of borrowers who apply for property loans and ensure that the borrowers’ monthly repayment for all debts does not exceed 60% of their monthly income.

Why is TDSR required?

Property loans can be large, long-term liabilities for most individuals and households. TDSR limits ensure that borrowers are not over-leveraged for property purchases. This means that after monthly contributions, homeowners still have enough money to maintain a comfortable lifestyle.

Need an expert to guide you on home loan matters? Our in-house mortgage specialist has over 30 years of experience. Get instant eligibility and loan comparison.

Call 6886 9009.

Consult an expert for free!

Send us your details and we’ll be in touch within 15 min (daily 9am to 9pm GMT +8).


Contact us your way

Talk to us today. Available daily 9 AM to 9 PM (GMT +8)

Subscribe Now

Get a notification every time we upload a new blog post.


Share on facebook
Share on twitter
Share on whatsapp
Share on email

Consult an expert for free!

Send us your details and we’ll be in touch within 15 min (daily 9am to 9pm GMT +8).


Featured Blogs

Highlighting unique property views for every Singaporean

get an agent

Sell with an Agent

Dedicated experts at your service

Documentation Services

Leave the paperwork to us

do it yourself

Prefer to do-it-yourself?

Check out how our platform can help

Post a Listing for Free

Download the app and connect with buyers


Ohmyhome E-Valuation

Know the value of your property in seconds!

Calculate Seller’s Stamp Duty

Find the amount payable when selling

How to Sell an HDB

A step-by-step guide to selling HDB

How to Sell my Private Property

A step-by-step guide to selling condo/landed