$18,000 on Paper, $15,750 to the Bank: How TDSR Actually Counts Mixed Income

Add up a household's payslips and most people get one number. A bank gets a smaller one. The gap isn't an error or a conservative bank being difficult — it's a rule. The Monetary Authority of Singapore requires every bank to haircut bonus, commission, allowances and rental income by a minimum of 30% before any of it counts toward what you can borrow. Fixed salary is the only income that counts in full. Here is exactly how the rule works, and what it does to a household that earns well but not entirely on a fixed paycheck.

Fixed income counts in full. Almost nothing else does.

Total Debt Servicing Ratio caps a borrower's monthly debt obligations — including the new mortgage — at 55% of gross monthly income. The income side of that formula is where most buyers overestimate. Per MAS's own TDSR rules, financial institutions must apply a minimum 30% haircut to variable income (commission, bonus, allowances) and to rental income. Only the remaining 70% is recognised.

Fixed monthly salary is the exception — it's counted dollar for dollar. Everything that varies month to month or year to year gets discounted, on the reasoning that it isn't guaranteed to repeat.

How the haircut gets applied

The mechanics matter as much as the rate:

• Variable income (bonus, commission, allowances) — banks average it over the preceding 12 months, then apply the 30% haircut to that average.
• Rental income — same 30% haircut, but banks must first verify it against a stamped tenancy agreement, signed by the borrower as landlord, with at least six months remaining on the lease. No valid TA, no rental income in the calculation.
• Self-employed income — treated as variable income and averaged over the latest two years of Notice of Assessment, haircut the same 30%.

None of this is a bank being cautious on its own initiative — it's the MAS-mandated floor. A bank can be stricter. It cannot be looser.

A mixed-income household, run through the numbers

Take a household with a fixed-salary earner, a second earner with meaningful commission income, and a rental unit they let out with a valid stamped tenancy agreement.

The household's payslips and rental statements add up to $18,000 a month. The bank's TDSR calculation recognises $15,750 — a gap of $2,250 every month, purely from the haircut.

Run that through the rest of the formula. At the 55% TDSR cap, this household can commit $8,662.50 a month to total debt. Against an existing car loan of $800, that leaves $7,862.50 for the mortgage instalment. Stress-tested at MAS's mandated 4% medium-term floor over a 30-year tenure, that instalment supports a maximum loan of roughly $1,646,900.

Had the household — or an agent working off the wrong assumption — used the full $18,000 declared income instead, the same math would have produced a maximum loan near $1,906,100. That's a gap of about $259,200 in loan quantum, purely from misunderstanding one rule. It's the difference between a loan a bank will actually approve and one that dies in underwriting after an Option to Purchase has already been signed.

The haircut applies to the loan under application, not your existing ones

One detail that trips people up in the other direction: the 4% stress-test floor only applies to the new loan being applied for. Existing property loans are assessed at their actual contracted rate, not re-stressed at 4%. Confusing this can make an existing portfolio look more constrained than it is.

Financial assets can supplement income, with their own haircuts

TDSR isn't limited to income streams. Eligible financial assets — cash deposits, stocks, unit trusts, gold — can be converted into an assumed "income stream" amortised over 48 months, but the haircuts are steeper than for income: unpledged assets take a minimum 70% haircut; pledging them for at least four years brings that down to 0% for cash or 30% for other financial assets. This is a lever some buyers can pull to close a shortfall, but it means locking up capital for years, not a free top-up.

What this means for planning

Three practical reads. First, don't plan a purchase around gross declared income — plan around the 70%-counted figure, especially if bonus or commission makes up a large share of a household's pay. Second, if rental income is meant to support an application, get the tenancy agreement stamped and signed well before applying — a verbal arrangement or an expiring lease counts for nothing. Third, if income has recently risen sharply (a new sales role, a business that just took off), the 12-month or two-year averaging window means the bank is still looking backward — a strong recent quarter won't move the number yet. Time the application to when the average has caught up, not when the headline income did.

Methodology published. No spin.

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Sources: TDSR calculation rules — the 55% cap, the 30% minimum haircut on variable and rental income, 12-month averaging, tenancy agreement verification requirements, the 4%/5% medium-term interest rate floors, and eligible financial asset haircuts — per MAS's official TDSR explainer. Worked household figures computed by TRIBE using MAS's stated formula and haircuts on an illustrative mixed-income household; loan quantum uses standard mortgage amortisation at the 4% stress-test floor over a 30-year tenure. Actual eligibility depends on a borrower's full financial profile and each bank's underwriting — confirm with a bank or mortgage broker before committing to a purchase.

Silas Tan is a District Director at Huttons Asia and co-founder of TRIBE. This article is for informational purposes and does not constitute financial or investment advice. CEA Registration R000303I.