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The Comprehensive Guide to Total Debt Servicing Ratio (TDSR)
Part II (Eligible Financial Assets)

As we learn in Part I, TDSR regulates the purchase or refinance of a residential property loan based on debts versus income. We now look at how financial assets can help to boost your borrowing ability.

Eligible financial assets are typically cash deposits, listed company shares, bonds, unit trusts or gold.

Liquid assets usually refer to un-encumbered funds that you can conveniently draw on within a short period of time. There are 2 ways for such assets to be recognized: pledged and unpledged.

Pledged assets are cash deposits that have to be deposited in a fixed deposit with the mortgage lender for the next 48 months (usually from the loan start date). The following is the formula converting your pledged asset to income.

Monthly Gross Income Derived from Asset =
Asset Value / 48

So, for example if you pledge $100,000, that would increase your monthly gross income by $2,083.

Unpledged assets do not have to be placed with the mortgage lender. The formula is:

Monthly Gross Income Derived from Asset =
Asset Value / 48
x 30%

For the same $100,000 deposit, your income will be increased by a markedly lower $625.

Now for investments, simply use the formula for unpledged assets as most of the time, the financial institutions would not accept pledging of these. Do bear in mind the risk of using investments to increase borrowing ability as the portfolio value may change between the initial approval and loan disbursement, unlike pure deposits.

On to Part III

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