The Mortgage Servicing Ratio (MSR) is a rule that decides how much of your income can go toward home loan payments. Many Singaporeans only hear about it when applying for an HDB flat or Executive Condo loan — and it can feel like an unexpected roadblock.

But MSR isn’t there to stop you from buying a home. It’s a safety measure that prevents you from taking on a loan you can’t comfortably afford. Once you understand how it works, MSR becomes less confusing and more like a helpful guide.

In this article, we’ll explain what MSR is, how banks calculate it, how it differs from TDSR, and what you can do if your numbers are tight. By the end, you’ll know exactly how much you can borrow and how to plan your home purchase smartly.

Key Takeaways

• The Mortgage Servicing Ratio (MSR) limits how much of a person’s gross monthly income can go to property loan instalments. The official cap is 30 percent for HDB flats and new ECs. Many advisors suggest staying nearer to 25 percent for more comfort and flexibility.
• MSR covers only property loans, while TDSR covers all debts such as housing loans, car loans, and credit cards. HDB and new EC buyers must pass both tests at the same time. Private property buyers only need to meet TDSR rules.
• The MSR calculation counts the new housing loan, any other property loans, and at least 20 percent of any property loan a person guarantees for someone else. Gross income includes fixed pay fully and most other income types with a haircut. Missing any of these items often leads to wrong estimates.
• There are practical ways to improve MSR, such as picking a more affordable home, reducing other debts, choosing a suitable loan tenure, using CPF OA wisely, and planning joint borrowing carefully. Understanding these points early helps buyers avoid painful loan rejections and shop within a realistic price range.

What Is The Mortgage Servicing Ratio (MSR)?

When someone asks what is mortgage servicing ratio in Singapore, the short answer is that it is a rule about how much income can go to housing loans. More formally, MSR is the percentage of a borrower’s gross monthly income that goes into paying all property-related loans. This covers both the new loan for the flat being bought and any existing property loans in the borrower’s name.

The Mortgage Servicing Ratio is set by the Monetary Authority of Singapore (MAS), so every bank and finance company has to follow the same rule. The main aim is simple: it keeps homebuyers from loading too much mortgage debt onto their income, which could cause stress later if interest rates move up or income falls. By having a single fixed limit, MSR helps buyers keep enough cash for daily costs, savings, and other goals.

MSR applies only to loans for Housing and Development Board (HDB) flats and Executive Condominiums that are still within their Minimum Occupation Period. If someone buys a private condo or landed home instead, the bank looks at TDSR rules rather than MSR. For HDB and new EC buyers though, MSR is one of the key gates to pass before a loan gets approved.

By law, the Mortgage Servicing Ratio cannot go above 30 percent of gross monthly income, a limit designed to maintain financial stability indicators across the housing market. In other words, total monthly instalments for all property loans cannot be more than 30 percent of what a borrower earns before CPF and tax. Many financial planners, and even CPF’s own guides, suggest aiming lower at around 25 percent, so there is more room in the budget for surprises.

A simple way to picture MSR is to think of it as a seat belt for home loans, similar to how mortgage structure and financial stability measures work together to protect both borrowers and the broader housing market. It does not stop someone from driving, but it stops them from driving too fast for the road ahead. At ArchiProp Singapore, we see MSR as one of the key tools that keeps homeownership stable, instead of something that exists just to make buying more difficult.

How Do You Calculate The Mortgage Servicing Ratio?

Knowing what is mortgage servicing ratio is helpful, but knowing how to work out the number is even better. The official formula that banks use looks like this:

MSR = (Total Monthly Property Loan Repayments ÷ Gross Monthly Income) × 100 percent

On paper that looks quite straightforward. The tricky part is what goes inside each part of the formula. Banks follow clear rules for both the repayments and the income side, and those rules are slightly stricter than what many people expect.

What Goes Into “Total Monthly Property Loan Repayments”

Total Monthly Property Loan Repayments is more than just the new HDB or EC instalment. It includes:

• The monthly instalment for the new loan, calculated using a “stress-test” interest rate of at least 4 percent, even if today’s promo package is lower.
• Instalments for any other housing loans, whether they are for another HDB, an EC, or a private property, both in Singapore and overseas.
• At least 20 percent of any property loan you guarantee for someone else.

On top of that, banks add a part of any property loan for which the borrower is a guarantor. At least 20 percent of that monthly instalment goes into the MSR count. So if someone guarantees a sibling’s mortgage of 2,000 dollars a month, 400 dollars will be added to their own monthly property repayments in the formula.

What Counts As “Gross Monthly Income”

Gross Monthly Income refers to income before employee CPF and tax, but not every dollar is counted in full:

• Fixed pay such as basic salary and permanent allowances usually counts at 100 percent.
• Variable income such as commission, bonus, overtime, and changing allowances is first averaged, then ‘hair cut’ by at least 30 percent. Only the remaining 70 percent goes into the MSR income figure.
• Rental income from another property usually counts at 70 percent, as long as there is a valid tenancy agreement with at least six months left.
• Selected financial assets, such as pledged shares or bonds, can sometimes be treated like income spread over 48 months, again after haircuts.

MSR Example Calculation

Here is how it works with numbers. Suppose a couple, John and Mary, earn a combined recognised income of 8,700 dollars a month. John earns 5,000 dollars in fixed salary. Mary earns 3,000 dollars fixed and an average of 1,000 dollars in commission. The bank will see 5,000 dollars from John, 3,000 dollars fixed from Mary, and 700 dollars from Mary’s commission after the 30 percent haircut, so 8,700 dollars in total.

Now imagine they are taking an HDB loan with a projected monthly instalment of 1,500 dollars. John is also a guarantor for his brother’s property loan with a monthly instalment of 2,000 dollars. For MSR, at least 20 percent of that 2,000 dollars counts, which is 400 dollars. So their total monthly property repayments for the formula are 1,900 dollars.

Their Mortgage Servicing Ratio is then:

1,900 ÷ 8,700 × 100 percent = 21.8 percent.

This is below the 30 percent cap and even below the more careful 25 percent line, so they pass the MSR test. It’s always good to do a rough sum like this before serious house hunting starts. This ensures you know what kind of price range to look at straightaway and avoid hunting for a house that is beyond your budget.

MSR Vs TDSR – What’s The Difference And Why Both Matter

Many buyers mix up MSR and TDSR because both are ratios and both deal with income and loans. They sound similar, but they are not the same thing. One big difference, besides the question what is mortgage servicing ratio, is that TDSR looks at all debts, not just property loans.

TDSR stands for Total Debt Servicing Ratio. It measures what share of a person’s gross monthly income goes into all monthly debt payments. This includes the housing loan, car loan, student loan, renovation loan, credit card bills that are rolled over, and any personal loans. Under current rules, a borrower’s TDSR cannot be more than 55 percent.

The table below shows how MSR and TDSR compare side by side.

If someone is buying an HDB flat or a new EC, banks must check both MSR and TDSR. For a private property buyer, only TDSR matters, since MSR does not apply outside public housing and new EC purchases. This means HDB and EC buyers face what we call a “dual cap” on their borrowing power.

Using the earlier example, John and Mary have an HDB instalment of 1,500 dollars and an MSR of 21.8 percent, which passes. For TDSR, we must add their other debts. Say John pays 800 dollars a month for a car loan, Mary pays 400 dollars for a student loan, and they pay 300 dollars a month in rolled-over credit card bills. Their total monthly debts are now 3,000 dollars.

Their TDSR is then:

3,000 ÷ 8,700 × 100 percent = 34.5 percent.

This is safely below the 55 percent cap, so they pass both MSR and TDSR. Another buyer might pass MSR but fail TDSR because of heavy car and personal loans. A different buyer could clear TDSR but fail MSR if property loans already take up too much of their income. This is why managing all debts, not just the home loan, is so important.

It’s important to always talk about MSR and TDSR in the same breath. For an HDB or EC buyer, both numbers have to look healthy, or the purchase will run into problems at the bank’s credit check.

5 Practical Strategies To Improve Your MSR And Secure Your Home Loan

MSR may be a fixed rule, but the numbers that go into it are not fixed forever. That is the empowering part. There are several levers a buyer can pull to make the Mortgage Servicing Ratio look better and raise the chance of a smooth loan approval.

Below are five practical moves we often walk through with readers and clients.

• Strategy 1 – Choose A Property Within Your Financial Comfort Zone.
  A simple guideline is to look at homes priced at about five times the household’s annual income. For example, if a couple earns 120,000 dollars a year, a 600,000 dollar property is a sensible starting point. At that level, the monthly instalment is much more likely to stay under the 30 percent MSR cap and closer to the 25 percent comfort line. Going far beyond that level may squeeze cash flow even if the bank still approves the loan.
• Strategy 2 – Reduce Existing Debts Before Applying.
  While MSR focuses on property loans, banks review TDSR in the same process, so other debts matter a lot. Paying down credit card balances, personal loans, or even trimming car loans can lower monthly debt obligations and free up room for the housing instalment. Even a few months of focused repayments can make the numbers shift in a helpful direction. This not only helps with approval but also makes daily life less stressful after moving in.
• Strategy 3 – Pick A Loan Tenure That Balances Cash Flow And Interest.
  A longer loan tenure lowers the monthly instalment, which improves MSR. For example, a 400,000 dollar loan at 4 percent interest will have a smaller monthly payment over 30 years than over 25 years, though more interest is paid over the full term. One approach is to start with a slightly longer tenure to pass the MSR test, then make higher voluntary payments later when finances are stronger. That way, buyers keep flexibility without locking themselves into a punishing instalment at the start.
• Strategy 4 – Use CPF Ordinary Account Funds With Care.
  It can be tempting to throw all CPF OA savings into the flat and enjoy a “no cash” feeling. The catch is that CPF money used for housing has to be refunded with interest when the property is sold, and draining OA balances can affect retirement later—similar to how property insurance and disaster risk considerations require careful planning of financial reserves. A more balanced way is to keep at least six months of instalments in OA as a safety buffer and aim for monthly OA deductions that are close to monthly OA contributions. Some buyers choose to pay part of each instalment in cash to keep more CPF growing for the long term.
• Strategy 5 – Think Carefully About Joint Borrowing.
  Adding a co-borrower can raise total recognised income and help MSR, but it can also pull in that person’s debts and guarantor duties. If one partner has heavy existing borrowings, including them may hurt more than it helps. In some cases, it is better for the partner with a cleaner credit profile to be the sole borrower, as long as the income is strong enough. Running both versions of the numbers with the bank or a trusted advisor can reveal which approach gives a healthier Mortgage Servicing Ratio.

When we explain what is mortgage servicing ratio to buyers, we always stress that these strategies are not only about passing a test. They are about making sure the home loan fits comfortably into life for many years, not just during the first honeymoon phase of owning a new place.

Conclusion

By now, the term Mortgage Servicing Ratio should feel a lot less mysterious. Instead of a scary bank rule, MSR is really a simple ratio that keeps housing loans at a safe level compared with income. For anyone buying an HDB flat or new EC, it answers more than just what is mortgage servicing ratio. It answers how much of a home a buyer can reasonably support without stretching every month.

The key numbers are clear. Property loan instalments cannot go above 30 percent of gross monthly income, and many people find that staying nearer to 25 percent makes daily life and savings plans much more comfortable. On top of that, HDB and EC buyers must also pass the 55 percent TDSR cap, which looks at all debts combined.

When buyers understand how MSR is calculated and which levers they can adjust, they move from guessing to planning. Choosing an affordable home, trimming debts, picking the right loan tenure, and being thoughtful with CPF all help shape a safer, smoother purchase. It also means fewer nasty surprises at the loan approval stage.

Part of the real estate work that we do is to aim to make both property selection and financing rules feel clear and manageable. Before falling in love with a listing, sit down for ten minutes, run through your own MSR, and see which price range really fits. With the right preparation and guidance, the numbers can support the home, instead of the home controlling the numbers.

FAQs

Question 1 – Does MSR Apply To Private Property Purchases?

MSR does not apply to private property purchases. It is used only for HDB flats and Executive Condominiums that are still within their Minimum Occupation Period. Private property buyers (both residential and non-residential properties) deal only with the Total Debt Servicing Ratio (TDSR), which is capped at 55 percent of gross monthly income. Because TDSR covers all debts, managing car loans, personal loans, and card balances is just as important as planning the home loan.

Question 2 – What Happens If I Am A Guarantor For Someone Else’s Property Loan?

Being a guarantor affects your own Mortgage Servicing Ratio even if you never pay a single instalment on that other person’s loan. For MSR, banks must count at least 20 percent of the monthly instalment of the loan you guarantee. If the loan you guarantee is 2,000 dollars a month, 400 dollars gets added to your property repayments in the formula. That higher figure can reduce the maximum housing loan you qualify for, so it is wise to consider guarantor requests very carefully.

Question 3 – Can I Use Rental Income From An Existing Property To Improve My MSR?

Yes, rental income can help improve MSR, but the bank will not count all of it. Lenders usually apply a 30 percent haircut and recognise only 70 percent of the monthly rent as income. They also require a valid tenancy agreement with at least six months left on the lease, to show that the income is likely to continue. The haircut allows for possible vacancies and running costs. So rental income does boost the income side of the formula, but buyers should not rely on every dollar of rent for their Mortgage Servicing Ratio.

Question 4 – Is The 25 Percent MSR Target Really Necessary, Or Can I Go Up To 30 Percent Comfortably?

The law sets 30 percent as the hard ceiling, so going that high is still allowed if the bank approves it. The 25 percent guideline is a comfort line that gives some breathing room. Life comes with surprises such as medical bills, family needs, and periods of lower income, and interest rates can move higher than expected. Clients who stay under about a quarter of their income for property loans are likely to feel a lot less pressure financially. It is worth looking at job stability, other goals, and lifestyle habits before deciding where on the 25 to 30 percent range feels safe.

Question 5 – How Does The Bank Decide Which Interest Rate To Use For MSR Assessment?

When a bank checks MSR, it does not use the low promotional rate on the website. Instead, it applies a stress-test rate that has a floor of 4 percent for residential properties, or sometimes higher based on the bank’s own standard rate. This practice tests whether a borrower could still handle the instalments if interest costs rise in future. The practical effect is that the maximum loan the bank offers may be lower than what a buyer calculates using the current promo rate. That is why, when working out what is mortgage servicing ratio for your own plans, it helps to use a conservative rate rather than the lowest number on the ads.