Rates and thresholds change. The current figures are kept in one place: the Singapore property rules reference.
What it is
The monthly instalment is the number that actually hits your bank account or GIRO deduction every month once your mortgage starts. It is usually the same amount each month for as long as your interest rate package stays the same, even though the mix of interest and principal inside that amount shifts gradually over the years.
How it works
Your monthly instalment depends on three things, how much you borrowed, the interest rate, and the loan tenure. A bigger loan or a shorter tenure raises the instalment, a smaller loan or a longer tenure lowers it. Before approving a loan, banks work out the maximum instalment you can be approved for under TDSR, which caps total monthly debt repayments at 55 percent of gross monthly income, using a stress test rate rather than the actual quoted rate. If the property is an HDB flat or Executive Condominium, a tighter cap called MSR limits housing related repayments alone to 30 percent of income.
Your gross income for this calculation usually includes salary, and often a haircut version of variable income such as bonus, commission, or rental income, since banks want to be confident the instalment is affordable even if income dips.
A simple worked illustration
On an illustrative income of 8,000 dollars a month with no other debt, the 55 percent TDSR ceiling would allow up to roughly 4,400 dollars a month toward the new instalment. Stress tested at a floor rate over a 25 year tenure, that ceiling might support a loan of a bit over 800,000 dollars, a rounded made up estimate rather than an exact bank calculation. The actual amount a bank offers you will depend on your real income, debts, and the bank's own assessment.
What first time buyers get wrong
- Working out an instalment using the quoted market rate rather than the higher stress test rate banks use to size the loan.
- Forgetting that other debts, such as a car loan or credit card, reduce how much of the 55 percent TDSR ceiling is left over for the mortgage.
- Sizing their budget around the maximum instalment a bank will approve, rather than what feels comfortable alongside other monthly expenses.
What to check
Work out your own TDSR position, and MSR position if buying an HDB flat or Executive Condominium, before you start viewing units. Ask your bank to show you both the instalment at the quoted rate and at the stress test rate, so you understand the buffer built in. This page explains the general mechanism only and does not recommend any specific loan amount or package for your situation.
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Winfred runs the real figures for your situation before you rely on a rule of thumb.
Book a free 30 minute callWinfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H). CEA R073319H. This page is for general information only and does not constitute financial, investment, or legal advice. Verify current figures with IRAS, HDB, CPF Board, or MAS before making any decision.