Secrets To Getting TDSR LOAN APPLICATION APPROVED?

Wondering How To Make Your TDSR LOAN APPLICATION APPROVED? 4 TIPS TO MITIGATE THE IMPACT OF DEBT ON YOUR TOTAL DEBT SERVICING RATIO Rock? Read This!

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What to do if you can’t meet the TDSR

We’ve discussed the TDSR before on 99.co. But what can you do if you can’t meet this loan restriction? Experts at DollarBack Mortgage have some helpful tips:

What is this TDSR thing that’s getting my loan application denied?

You can find a quick description of the TDSR in our jargon section. But as a quick recap:

The TDSR limits your monthly loan repayments to 60 per cent of your monthly income. For example, say you earn$7,000 per month. Your total home loan repayment, plus any other debt repayments, cannot exceed $4,200.

The TDSR limits your monthly loan repayments to 60 per cent of your monthly income. 

But say you can’t meet the TDSR. You will often be given three simple solutions:

1) Make a bigger down payment

2) Stretch out the loan tenure (thus reducing the monthly repayments), or

3) Simply buy a cheaper house.

But there are other steps you can take

There are other ways to meet the TDSR, that you can try instead of the above. Thanks to the experts at DollarBack Mortgage, who pointed out the following:

  • Inform the bank of any bonuses or commissions you’ve earned
  • Use fixed deposits or share portfolios to raise your effective income level
  • Inform the bank of any rental income you earn
  • Exclude a co-borrower who holds too much debt.

1. Inform the bank of any bonuses or commissions you’ve earned

  • Many banks, when assessing your income, default to looking at three months of your payslips. However, this may not accurately reflect your financial situation.
  • Highlight to the bank any bonuses or commissions you earned recently.
  • If you have earned any bonuses or commissions prior to the three months being assessed, for
  • instance, the bank may be unaware of it.
  • You can highlight this to the bank, and provide 12 months of your payslips instead.

2. Use fixed deposits or share portfolios to raise your effective income level

  • If you have a fixed deposit with the bank, you can highlight this amount to the mortgage banker – the bank might consider you to effectively have a higher income level, if the deposit is sizeable enough.
  • The same can be done if you have a share portfolio in your Central Depository Account (CDA).
  • If you have a fixed deposit with the bank, you can highlight this amount to the mortgage banker.
  • The exact amount by which this impacts your TDSR varies between banks; it is best to consult a home loans broker, to
  • compare between banks (they can also help with the detailed paperwork this method requires).

3. Inform the bank of any rental income you earn

  • If you currently earn rental income on any of your properties, be sure to declare it to the banks. This can add to your income levels, for the purposes of determining your TDSR.
  • For your declared rental income to be valid, you must have an active Tenancy Agreement (TA), with at least six months’ tenancy from the date of your loan application. You must also have a valid stamp duty certificate from IRAS.
  • Declare your rental income to the bank!
  • Note that, as mentioned above, rental income counts as variable income. This means the bank will consider only around 70 per cent of the rental income, when working out your TDSR.

4. Exclude a co-borrower who holds too much debt

  • If there is a co-borrower for the property, such as your spouse or a parent, consider who among you has the biggest debt obligations. If most of the debt is on your co-borrowers, it may be better to exclude them and be the sole borrower.
  • Besides these methods, it’s important to manage your monthly obligations to improve your TDSR numbers.
  • If there’s a co-borrower for the property with big debt obligations, exclude him and be the sole borrower.
  • If you have substantial debts, it’s advisable to start aggressively paying them down, in the six to 12 months preceding your home loan application. The less you owe, the less likely you are to breach the TDSR limit.
  • Which leads us to…

Debt issues and your TDSR

  • The less you owe, the less likely you are to breach the TDSR limit.
  • Take note of the following, to mitigate the impact of debt on your TDSR:
  • 1) Avoid applying for new credit facilities, such as credit cards or personal loans, in the two months prior to a home loan application
  • 2) If you have an outstanding car loan, try to clear it at least one month before making a home loan application.
  • 3) Your credit report, which is what the banks use to check your debt obligations, is refreshed on a monthly basis. This means you always have at least a one-month head start, to clear any existing debts before your home loan application (you can obtain a copy of your credit report from the Credit Bureau of Singapore (CBS) website, for a fee of $6.42).
  • 4) Having never had debt before is not good either. This will cause your credit report to show a grade of “Cx”, which means the system cannot assess how reliable you are with loan repayments. If you’ve never used credit before, take a small loan from the bank ($1,000, or apply for a credit card and charge something to it), and then pay it back. You can do this in the month or two prior to your loan application.

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