Salary.sg Forums - Reply to Topic
Salary.sg Forums  

Go Back   Salary.sg Forums > The Salary.sg Discussion Forums: > Investments and Net Worth > Can you Afford that Condo? Introducing the Debt Ratios

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




Salary.sg Forums

Thread: Can you Afford that Condo? Introducing the Debt Ratios Reply to Thread
Your Username: Click here to log in
Human Verification To prove you are a human and not a computer program that spams, please check the box below and answer any further questions if prompted.

Title:
  
Message:
Post Icons
You may choose an icon for your message from the following list:
 

Additional Options
Miscellaneous Options

Topic Review (Newest First)
04-08-2009 09:21 AM
Husky
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...
03-08-2009 06:57 PM
Unregistered
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.
03-08-2009 05:25 PM
Husky
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???
09-05-2009 11:07 PM
Salary.sg
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/

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




All times are GMT +8. The time now is 05:01 PM.


Powered by vBulletin® Version 3.8.5
Copyright ©2000 - 2024, Jelsoft Enterprises Ltd.
Content Relevant URLs by vBSEO 3.3.2