MSR Calculator for Buying HDB or Brand new EC
MSR Formula
The formula to calculate the Mortgage Servicing Ratio (MSR) is:
The result of this calculation must be less than or equal to 30% for you to be eligible for a home loan for an HDB flat or an Executive Condominium (EC).
MSR Calculation Example – MSR Calculator for Buying HDB or Brand new EC
Let’s use an example of a couple, Alex and Brenda, who want to buy an HDB resale flat.
Step 1: Determine the Inputs
- Combined Gross Monthly Income: Alex earns $4,500 and Brenda earns $3,500. Their total gross monthly income is $8,000.
- Property & Loan Details:
- Purchase Price: $580,000
- Desired Loan Amount: $450,000
- Loan Tenure: 25 years
- Interest Rate for Calculation: Financial institutions don’t use the current promotional rate. They use a higher “medium-term interest rate” (currently around 4.0% p.a.) to stress-test your ability to pay.
Step 2: Calculate the Monthly Home Loan Repayment
Using the loan details ($450,000 over 25 years at 4.0%), the estimated monthly repayment would be approximately $2,375.
Step 3: Apply the MSR Formula
Now, we plug the monthly repayment and gross income into the formula:
Conclusion
Alex and Brenda’s MSR is 29.7%. Since this is below the 30% limit, they meet the MSR requirement and would be eligible for the $450,000 loan, assuming they also meet other criteria like the Total Debt Servicing Ratio (TDSR).
MSR Calculator: 5 Key Things HDB Buyers Must Know in 2025
So, you’re ready to buy an HDB flat or an Executive Condominium (EC)? Congratulations! Before you start shortlisting units, there’s a crucial number you need to know: your Mortgage Servicing Ratio (MSR). It’s a key part of Singapore’s property cooling measures designed to ensure financial prudence.
Understanding this rule is the first step to a stress-free home-buying journey. Here are five essential things you need to know about the MSR and how to calculate it.
1. What Exactly is the Mortgage Servicing Ratio (MSR)?
The Mortgage Servicing Ratio (MSR) is a lending rule that applies only to housing loans for HDB flats and ECs. It caps the amount you can spend on your monthly home loan repayments at 30% of your gross monthly income.
Why does this rule exist? To prevent buyers from becoming “house poor” by over-stretching their finances. It ensures you have enough money left over for other daily expenses. The quickest way to determine your limit is by using a reliable MSR Calculator, which does the math for you in seconds.
2. MSR vs. TDSR: Knowing the Difference
It’s common to confuse MSR with the Total Debt Servicing Ratio (TDSR), but they serve different purposes.
- MSR (30% Cap): Applies only to your HDB/EC housing loan.
- TDSR (55% Cap): Applies to all your monthly debt obligations combined (your new home loan + credit card bills + car loans + personal loans).
As an HDB or EC buyer, you must meet both the 30% MSR and the 55% TDSR criteria. A comprehensive HDB affordability calculator can help you see the full picture of what you can comfortably afford.
3. The Impact of Property Valuation on Your MSR
Your home loan amount isn’t just based on the price you agree to pay. The bank will lend you a percentage of the property’s purchase price or its official valuation, whichever is lower.
If you pay a price higher than the valuation (known as Cash Over Valuation or COV), you must cover that difference in cash. This doesn’t change your MSR limit, but it directly impacts your upfront costs. Getting a free property valuation is a smart move to avoid any surprises and ensure your finances are in order.
4. How “Gross Monthly Income” is Calculated
The “income” part of the MSR calculation can be tricky, especially if you don’t have a fixed salary. Here’s a simple breakdown:
- Fixed Salary Earners: Your gross monthly income before CPF deductions is used.
- Variable/Commission Earners: Lenders will typically average your income over the last 12 months and apply a “haircut,” meaning they’ll only consider about 70-80% of that income for the calculation.
Be sure to input your income details accurately into the MSR calculator for a realistic estimate.
5. Planning Ahead: How MSR Connects to Future Profits
While the MSR is a rule you must follow when buying, it also has long-term implications. By not maxing out your 30% MSR limit, you create a healthier financial buffer for yourself. This financial flexibility can be crucial if interest rates rise or your income changes.
This careful planning at the start can put you in a better position when you eventually decide to sell. To see how your purchase price and loan affect your future gains, a property profit calculator can help you forecast your potential returns.
