TDSR (total debt servicing ratio) splits a person’s income into 2 parts: fixed monthly employment income, and others. Only fixed monthly employment income is recognized 100%, all the rest being variable are given 30% haircut, i.e. only 70% will be taken as stable income. The variable income could be your 13th month salary, bonus, rental income (if tenancy has more than 6 months to go upon loan application).
If employment/business and rental incomes are not sufficient, savings may be pledged for 48 months or non-pledged. The pledged savings will give you some level of leverage whilst the non-pledged savings could be even higher than your desired loan amount!
Stocks & shares statement could be used if savings are not sufficient but its haircut rate is even higher.
Below are common income documents to be presented for banks under TDSR requirement.
- Latest 3 months pay slips: This is to prove fixed monthly employment. Some banks need salary crediting bank statement to tally with the reported monthly salary. This is the only income with 100% recognition.
- Latest income tax assessment: the difference between the reported accessible income and 12 times fixed monthly salary is deemed “variable income”. 70% of it will be recognized. Property income is not part of the variable income and it is calculated separately.
- Tenancy agreement: only tenancy with minimum 6 months to go upon loan application will be recognized and as tenancy fluctuate, only 70% monthly rental is considered “stable”.
- Savings statement: this is an additional document to prove servicing ability if the above 3 income sources are insufficient.
- CDP statement: this is a supplementary document if savings statement figure is insufficient. However as a heavy haircut applies on stocks & shares as its market value changes every day, you will find the leverage power of stocks & shares are minimal.