When Singaporean borrowers face mortgage application obstacles under the Total Debt Servicing Ratio (TDSR) rules, the terms “show fund” and “pledge fund” often come into play. 

 

These mechanisms allow borrowers to demonstrate additional financial capacity and meet loan eligibility, but their nuances are critical to understand. Here’s your comprehensive guide.

 

Why Banks Ask for Show or Pledge Funds

Singapore’s TDSR framework (currently capped at 55%) limits the total monthly debt obligations to a portion of your gross income. If your income falls short, banks may require you to present show or pledge funds as eligible “income support.”

 

These assets serve as proof of liquidity, allowing the lender to refine loan assessment beyond fixed salary.

 

What Are Pledge Funds?

• Definition: You deposit cash into a fixed deposit account with the same bank where you’re applying for the mortgage, typically for a minimum of 48 months.
  

• How It Works: The bank converts these pledged funds into recognisable “monthly income”
  

•  E.g. Private property Buyer requires an additional S$100,000 loan, he/she will be required to pledge $41.7k (Tenor 30years, Stress test 4%, Private Property)
•  E.g. HDB Buyer requires an additional S$100,000 loan, he/she will be required to pledge $84.5k (Tenor 25years, Stress test 4%, HDB) 
• Additional Perks: You still earn interest on these pledged funds, and some banks offer these at special fixed deposit interest rates, which can offset your loan interest.
  

What Are Show Funds?

• Unencumbered Assets: These include cash, equities (e.g., SGX-listed stocks held in custodial accounts), bonds, or other recognised securities. You don’t have to lock them in a fixed deposit, but they must be visible to the lender. 
•  E.g. Private property Buyer requires an additional S$100,000 loan, he/she will be required to show $139k (Tenor 30years, Stress test 4%, Private Property)
•  E.g. HDB Buyer requires an additional S$100,000 loan, he/she will be required to pledge $282k (Tenor 25years, Stress test 4%, HDB)
• Remarks: Often used when liquidity access and flexibility are more critical than maximising TDSR boost, especially for short-term planning.

Timing and Process: Two Stages

Both pledge funds and show funds must appear at two critical points:

1. Loan Application Stage – present proof of assets
   

2. Pre-Completion / Key Collection, typically within 7 days, funds must still be available and in place
   

This ensures no asset shift occurs during application to drawdown.

 

Variable Bank Policies and Treatment

• Some banks recognise show funds at 100% of value with no haircut, equating them with pledged assets, a rare but advantageous policy

• Banks also recognise foreign currency as show funds. Foreign currency in Singapore Banks or foreign banks

• For show fund using equities or Foreign currency, some banks only need to show fund once during the application stage as well.

Why CPF OA Doesn’t Count

CPF Ordinary Account monies cannot be used as show or pledge funds, the funds need to be liquid, unencumbered cash or recognized assets visible to the bank.

 

HDB vs Private Property: Different Thresholds

Due to the Mortgage Servicing Ratio (MSR), show/pledge fund requirements vary:

• HDB Loans require a lower MSR cap (e.g., 30%), making borrowing softer initially.
• To compensate, HDB buyers need to show/pledge a higher amount than private buyers for the same additional S$100k of loan.

Realistic Loan Rescue Scenario

Imagine you need an additional S$100k and your income doesn’t meet TDSR for private property.

 

• With full pledge of S$41.7k
• With show fund of S$139k
• Depending on the MSR/TDSR gap, you will likely need much more in show fund versus pledge fund to clear eligibility.

Banks vary; some accept show fund at full value while others give heavy haircuts, so check bank-specific terms early.

 

Key Takeaways

Pledge funds and show funds offer valuable alternatives when your TDSR income falls short. For maximum boost, pledge funds are more impactful, but if you value flexibility and liquidity, show funds offer a useful trade-off.

 

Always compare bank options, ask about haircuts, FD interest, and dual-stage verification. And of course, speak with your Fairloan mortgage advisor for tailored recommendations that navigate these rules to your advantage.