How to use the 3-3-5 rule to consider if you can afford your new home

21 Sep 2017 

​Housing affordability extends beyond your income. Here's how the 3-3-5 rule help you understand the financial considerations that come with your desired property.

How to use the 3-3-5 rule to consider if you can afford your new home.png 


1.  30% of property price

Your initial capital should be at least 30% of the property's asking price, to account for expenses including your downpayment, transaction costs, stamp duty, legal fees, and other miscellaneous expenses.


2.  1/3 of monthly income

Ideally, your monthly mortgage payment should not exceed one-third of your monthly salary.


For all property purchases, the Total Debt Servicing Ratio (TDSR) will limit your mortgage loan payments to 60% of your gross monthly income, minus any outstanding debts that you may have.


If you are buying public housing like Build-To-Order (BTO) flats, resale HDB flats, or Executive Condos (ECs), you will also be subjected to the Mortgage Service Ratio (MSR), which will limit your monthly mortgage payments to 30% of your gross monthly income.


If the TDSR and MSR are both applicable under your purchase, your monthly loan repayments will be up to the lower of these two amounts.


3.  5 times of annual income

The total purchase price of your property purchase should not exceed five times of your annual income. This will help you to spend within your means and prevent your property purchase from becoming a strain on your finances.  


Information above is adapted from Property Soul


Information accurate as at 21/9/2017

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