They chose financial independence over home ownership.

This is somewhat extreme but watch how this Canadian couple chose financial independence over home ownership.  They are in their 30s and,...

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TEA with ENZA: Total Debt Servicing Ratio (TDSR).

Thursday, April 3, 2014

Another guest blog that is actually a collection of comments by a very bright fellow I got to know on FB. Reproduced with his permission:

Total Debt Servicing Ratio (TDSR) = Debt Repayments/Income (per month)

Many of our textbooks are based on western spending patterns, which I think isn't feasible for Asians. I would target 25% of TDSR.

IMO, a household cannot have more than 3 durable goods under instalment (because they are going to be a drag over long-run), whereas housing and vehicles cannot, in combination, exceed 20% of gross combined wage median. Always concentrate on paying off one thing at a time since we only have this much of resources.

You see, Asian parents normally pay for their children's university fees. That is a big chunk.

In the USA and Europe, most parents don't. That's why they can have a bigger TDSR. Of course, the most important thing is SG cars are TOTAL WASTE OF MONEY. Only if we can really waste the "excess money", then should we ever own them. So, i
f depreciation plus insurance plus road tax plus basic maintenance are below 10% of your wage income, no harm. (which is quite unlikely in SG, all because of the COE.)

Are you too much in debt?

Read other guest blogs by ENZA: here.

Related posts:
Don't think and grow rich.
2. Slaving to stay in a condominium.
3. The Millionaire Next Door.


AK71 said...

This is a set of rules that restricts financial institutions from lending to an individual if his outstanding debt repayments (any debt, not only linked to property) exceed 60% of his gross income (including the potential new loan). The interest rate used for calculation of the new loan is 3.5% or the actual interest rate, whichever is higher. Guarantors must not exceed the TDSR threshold as well.

The LTV limit is the maximum percentage of the purchase price (price agreed upon between buyer and seller) or valuation price (given by the bank), whichever is lower, that can be borrowed from the bank.

80% if you do not have any other outstanding loan. If you are a foreigner without PR status, some banks might cap at 70% or even 60%.

50% if you have one outstanding loan.

40% if you have two or more outstanding loans or if you are buying under a company.

If you are a Singapore citizen, the ABSD is 0%/7%/10% if you are buying your first/second/third or subsequent property respectively.

If you are a Singapore Permanent Resident, the ABSD is 5%/10% if you are buying your first/second or subsequent property respectively.

If you are a foreigner (living in Singapore or not) or buying under a company, the ABSD is 15% if you are buying your first or subsequent property.

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