What is MSR?

MSR is the percentage of your gross monthly income that is used to repay your mortgage. The mortgage repayment ratio only applies to the purchase of HDB flats and the execution of condominiums.

The current cap on the mortgage repayment ratio is 30%, which means that if you earn $4,000 a month, only $1,200 of your salary can be used for mortgage repayment.

While it may seem strict, this is actually a sensible enough approach to help ensure that buyers only choose homes they can afford.

What is the Total Debt Service Ratio?

Many buyers ask if MSR and TDSR are the same thing. The answer is no.

The Total Debt Service Ratio states that 55% of a borrower's gross monthly income can only be used to pay off debt.

These debts to be paid include all of your loans, including but not limited to your mortgage. So this means that if you have any other outstanding loans, they will all count toward that 55%.

As mentioned earlier, the mortgage repayment ratio only applies to the purchase of HDB flats and executive condominiums. If you want to buy a private home, you only need to consider the total debt service ratio.

Loan and LTV

LTV refers to the maximum amount a buyer can borrow, whether the loan comes from HDB or a bank. The loan to valuation ratio is to prevent borrowers from over-leveraging.

HDB Concessionary Loans are only available for the purchase of BTO, SBF, ROF and resale HDB flats with a loan to valuation ratio of up to 85%. This means that you can borrow up to 85% of the valuation or purchase price of the property.

For bank loans, the maximum loan-to-valuation ratio for the first loan is 75%.

Of the remaining 25%, 5% must be paid in cash. The remaining 20% can be paid in combination with cash and your CPF Ordinary Account deposit.

How to apply for a bank home loan

The first step in obtaining a home loan from a bank is the IPA.

This is a review of the terms and conditions of your home loan, stating how much you can borrow from the bank and the applicable loan package, so you can have a better idea of which properties are within your budget.

Once you decide to sign a loan package with the bank, you will receive an LO that lists all the important information such as the loan amount, interest rate and loan lock-in period.

With this loan agreement, you can then OTP and start buying the property.

Some common documents required to apply for a bank loan include:

• A copy of your ID.

• Pay stubs for the last 3 months.

• Personal income tax forms for the last 2 years.

• The latest CPF General Account Statement.