Can you Afford that Condo? Introducing the Debt Ratios - Salary.sg Forums
Salary.sg Forums  

Go Back   Salary.sg Forums > The Salary.sg Discussion Forums: > Investments and Net Worth

Investments and Net Worth Talk all about money making exploits, shares, property, building net worth and retirement matters




Can you Afford that Condo? Introducing the Debt Ratios

Reply
 
Thread Tools
  #1 (permalink)  
Old 09-05-2009, 11:07 PM
Salary.sg
Guest
 
Posts: n/a
Default Can you Afford that Condo? Introducing the Debt Ratios

Banks use the Debt Service Ratio to assess your creditworthiness.

Defined as the monthly loan installment amount divided by your gross monthly income, your DSR typically has to be somewhere in the 35% to 40% region for banks to be happy to grant you that mortgage. (See also past article on second home loan.)

However, the DSR ratio doesn't say if you're taking up excessive loans.

You may have a low overall DSR, but due to low interest rates and long mortgage tenors, you may be piling up too much loans. Or maybe your income has just gone up (how nice) , but with savings still remaining low, your DSR may look deceptively good.

It is even possible to have negative net worth with good-looking DSR. Banks don't care, but I hope you do.

To be safer, you should also look at your Debt to Net Worth ratio.

This is similar to the Debt Equity Ratio used by financial analysts to assess companies. Small companies with 60% D/E are deemed to be ok.

I would keep my Debt to Net Worth ratio at 50% or lower.

Calculating your Debt to Net Worth ratio is straightforward: Total up your outstanding loans, and divide the sum by your net worth (see how to calculate your net worth).

For example, if your outstanding loans sum up to $500k and your net worth is $1 million, your Debt to Net Worth ratio would be 50%.

What is your Debt to Net Worth ratio?


http://www.salary.sg/2009/can-you-af...e-debt-ratios/

Reply With Quote
  #2 (permalink)  
Old 03-08-2009, 05:25 PM
Husky's Avatar
Senior Member
 
Join Date: Jun 2009
Posts: 91
Husky is on a distinguished road
Default

Quote:
Originally Posted by Salary.sg View Post
Banks use the Debt Service Ratio to assess your creditworthiness.

I would keep my Debt to Net Worth ratio at 50% or lower.
Can you Afford that Condo? Introducing the Debt Ratios | Salary.sg - Your Salary in Singapore
Is it even possible for working class people like me? 50% leh... if I were to take a housing loan for $400k, then maybe buy a car take another $80k loan. In order for my debt/net worth ratio to be 50% I need to have one mil???

Reply With Quote
  #3 (permalink)  
Old 03-08-2009, 06:57 PM
Unregistered
Guest
 
Posts: n/a
Default

Quote:
Originally Posted by Husky View Post
Is it even possible for working class people like me? 50% leh... if I were to take a housing loan for $400k, then maybe buy a car take another $80k loan. In order for my debt/net worth ratio to be 50% I need to have one mil???
Quite hard, but can be done. Don't forget your flat and car have some value, and that you and your wife will share the burden.

Assume you own nothing but a flat. If it's worth $300k in the market and you still owe bank $100k, then you'll achieve that ratio of 50%.

But for your situation, assuming your flat is worth $500k and your car's scrap value is $70k, then your wife and you will need $870k in OTHER assets to achieve that 50% ratio.

If the car doesn't come into the picture, it's just $700k you need in other assets.

If, further, you owe only 300k on the flat, it's just $400k.

Reply With Quote
  #4 (permalink)  
Old 04-08-2009, 09:21 AM
Husky's Avatar
Senior Member
 
Join Date: Jun 2009
Posts: 91
Husky is on a distinguished road
Default

Quote:
Originally Posted by Unregistered View Post
Quite hard, but can be done. Don't forget your flat and car have some value, and that you and your wife will share the burden.
Maybe when I am 45... During the initial phase the debt sure exceed my net worth many times over...
Reply With Quote
Reply

Bookmarks

« Previous Thread | Next Thread »
Thread Tools

Posting Rules
You may not post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are On
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Rent out HDB and stay in condo Magdeline Investments and Net Worth 27 19-11-2009 03:23 PM
HDB Condo Ratio Salary.sg Investments and Net Worth 4 28-12-2008 10:21 PM
Can you afford Landed Property? Salary.sg Investments and Net Worth 0 13-01-2008 08:29 PM

» 30 Recent Threads
Factual Local Bank Salaries - DBS... ( 1 2 3... Last Page)
133 Replies, 65,199 Views
How much do you earn and save?
9 Replies, 232 Views
Q: Big4 - Yearly salary increment ( 1 2 3... Last Page)
931 Replies, 741,308 Views
Officer Role in Bank of Tokyo -... ( 1 2 3... Last Page)
179 Replies, 143,166 Views
Q: Management Associate at SGX ( 1 2 3... Last Page)
88 Replies, 12,300 Views
SIM-UOL fresh grad starting pay ( 1 2 3... Last Page)
2,689 Replies, 1,255,479 Views
Career as Teacher ( 1 2 3... Last Page)
2,572 Replies, 1,555,048 Views
For local U grads, how well are...
3 Replies, 311 Views
Anyone jobless for a long time... ( 1 2 3... Last Page)
2,839 Replies, 1,060,411 Views
Lawyer Salary ( 1 2 3... Last Page)
5,731 Replies, 2,393,551 Views
Local Uni Class of 2020 - COVID19... ( 1 2 3... Last Page)
256 Replies, 48,282 Views
Civil Svc/ Statboard - Typical... ( 1 2 3... Last Page)
1,998 Replies, 921,964 Views
Compare civil service salary ( 1 2 3... Last Page)
9,746 Replies, 5,459,959 Views
How is life as a doctor in... ( 1 2 3... Last Page)
1,160 Replies, 881,469 Views
Roles in accenture singapore ( 1 2 3... Last Page)
331 Replies, 241,172 Views
Marsh Graduate Development Program ( 1 2 3... Last Page)
58 Replies, 5,130 Views
Constituency Manager (People... ( 1 2 3... Last Page)
861 Replies, 439,271 Views
Mid-Year Civil Servant Bonus 2019 ( 1 2 3... Last Page)
1,478 Replies, 749,398 Views
Dsta ( 1 2 3... Last Page)
817 Replies, 535,310 Views
MINDEF DXO (All FAQ on it) ( 1 2 3... Last Page)
3,221 Replies, 1,862,665 Views
Ex-MOE Teachers ( 1 2 3... Last Page)
71 Replies, 110,569 Views
Diploma in Digital Marketing at...
3 Replies, 1,101 Views
anyone working at NCS ? ( 1 2 3... Last Page)
355 Replies, 275,478 Views
Whats your net worth ( 1 2 3... Last Page)
2,711 Replies, 781,109 Views
DBS Management Associate Program... ( 1 2 3... Last Page)
1,308 Replies, 236,417 Views
Pay grade at CSA ( 1 2 3... Last Page)
104 Replies, 23,969 Views
Cold calls/emails to HR ( 1 2)
13 Replies, 1,324 Views
Insurance Agent to Bancassurance...
7 Replies, 5,167 Views
ITE lecturer ( 1 2 3... Last Page)
121 Replies, 114,180 Views
Insurance Management Associate... ( 1 2 3... Last Page)
60 Replies, 16,457 Views
Powered by vBadvanced CMPS v3.2.2



All times are GMT +8. The time now is 04:57 PM.


Powered by vBulletin® Version 3.8.5
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
Content Relevant URLs by vBSEO 3.3.2