Should we quickly pay down our house mortgage with all our excess monies less expenses, or keep should we use our extra income to invest?
Before we start, let us do a simple mortgage analysis.
Assuming 2% interest p.a. on average, below is a table depicting different loan amounts with varying loan periods of 30, 25, 20, 15 years to show what is the total interest payable and the monthly instalments.
Mortgage Service Ratio
In the above table, you can see the Mortgage Service Ratio (MSR) which is defined as the ratio of monthly instalment to household income, kept at 30%.
Currently, the Singapore government set the Total Debt Service Ratio (TDSR) limit at 60% which means all your debt obligations (student loans, credit card debts, car loans, personal loans, and so on), cannot exceed 60% of your income.