If you need to borrow a large sum of money and have a property on hand, you can “cash out” on your property’s value through a home equity loan or a mortgage equity withdrawal loan.
This option isn’t the most accessible choice for everyone on the market, as approval largely depends on the bank, but it’s not uncommon.
A series of property cooling measures introduced by the government has affected Singapore’s Total Debt Servicing Ratio (TDSR) framework and Loan-to-Value (LTV) ratio, indeed stifling “cash out” opportunities for many. However, for some, “unlocking” their property’s appreciation is still a viable option, and here we will show you how to get a home equity loan or mortgage equity withdrawal loan in Singapore.
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Table of Contents
What is a Home Equity Loan or Mortgage Equity Withdrawal Loan?
A home equity loan or mortgage equity withdrawal loan means the same thing. When you take out a mortgage equity withdrawal loan, you are using your property’s equity as collateral. Therefore, if your property has appreciated in value over time, a home equity loan may be the best way to borrow some money at a low interest rate.
How this works is by essentially re-evaluating your property’s value, and if the value has sufficiently increased since you purchased it, you may be able to take a loan on a portion of that increased value on top of your existing home loan.
You can do this even if you haven’t fully paid off your home loan yet. In effect, you are borrowing against the portion of your property that you have fully paid for. This is known as cash-out refinancing, or a mortgage equity withdrawal loan.
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Who is Eligible for a Home Equity Loan?
In Singapore, only owners of private property are eligible for a home equity loan. Therefore, if your only property is an HDB flat, you will not be eligible for cash-out refinancing.
If you own an Executive Condominium (EC), you must wait until the 5-year Minimum Occupation Period (MOP) is over before you can consider cash-out refinancing.
If you still have an outstanding home loan, you can only get a home equity loan from the same bank as your home loan. For example, if you currently have a mortgage with OCBC, you can only get a home equity loan from OCBC.
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What are the Interest Rates for a Home Equity Loan?
The interest rates for a home equity loan are usually the same as home loan rates—currently around 3% to 4%.
In comparison, the interest rates for renovation loans, commercial property equity loans, debt consolidation plans, and education loans are all much higher.
| Loan Type | Interest Rate |
| Home Equity Loan | 3% – 4% |
| Renovation Loan | 2.98% – 5.8% |
| Commercial Property Equity Loan | 3.5% – 6% |
| Debt Consolidation Plan | 4% – 6% |
| Education Loan | 4.5% – 5.88% |
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How Much Can You Borrow from a Home Equity Loan in Singapore?
Typically, banks allow you to borrow up to 75% of your property’s value. But first, you need to subtract all outstanding loan amounts and all Central Provident Fund (CPF) contributions used to purchase the property.
That’s right, this isn’t a cheat code to cash out your CPF savings!
You will also be limited by the Total Debt Servicing Ratio (TDSR), which means your loan repayments cannot exceed 55% of your monthly income.
However, since 2017, to specifically accommodate retired elderly Singaporeans, if your loan amount is 50% or less of your property’s value, you will no longer be subject to the TDSR limit.
Here is an illustration to make it clearer.
Mrs. Guo’s property is valued at S$1.6 million, and she has an outstanding loan of S$300,000. So far, she has also used about S$500,000 from her CPF to purchase this property.
| Property Composition | Home Equity Loan Amount |
| 75% of Property Valuation | 75% x S$1.6 million = S$1.2 million |
| Outstanding Home Loan | S$300,000 |
| CPF Used for Property Purchase | S$500,000 |
| Maximum Mortgage Equity Withdrawal Loan | S$1.2M – S$300k – S$500k = S$400,000 |
If she wants to get a home equity loan, she is eligible to borrow S$400,000. Because her total loan (i.e., mortgage equity withdrawal loan + outstanding loan) is below 50% of the property value, she doesn’t need to worry about the TDSR framework limitations.
What is the Loan Tenure for a Home Equity Loan in Singapore?
The maximum loan tenure is 75 years minus your current age.
This means if you are 45 years old, the maximum loan tenure is 30 years.
If you are currently repaying a home loan, you also need to subtract the years you have been repaying it.
So, if you are 45 years old and have been repaying your home loan for 20 years, your maximum loan tenure is only 10 years.
Should You Get a Home Equity Loan?
If you need a large sum of money to renovate your house, get start-up capital, or fund your child’s higher education, a home equity loan is quite ideal. Because the interest rates are low, you can also get a fairly high loan amount.
In all these cases, other options either have higher interest rates, lower loan amounts, or both.
You can borrow more money with a home equity loan
Most loans only allow you to borrow up to 4 times your monthly salary. For a typical Singaporean, this means you can’t borrow more than S$20,000 at a time. And due to TDSR limits, your total loan repayments cannot exceed 55% of your monthly income.
As we noted earlier, home equity loans do not have this restriction. You can easily borrow S$50,000 or more if necessary. And you don’t have to worry about the TDSR limit (as long as the bank approves the loan).
Other FAQs about Getting a Home Equity Loan in Singapore
1. What other costs are involved in getting a home equity loan?
Home equity loans have higher upfront costs. Property valuation involves additional administrative and legal fees, ranging between S$2,000 to S$3,000. Since your loan amount is tied to your home’s value, this is mandatory. These administrative and legal fees are charged each time you apply for a home equity loan, so determine the amount you need to borrow before applying.
2. How long does it take to approve a home equity loan?
A home equity loan takes a considerable amount of time (about 2 months) to be approved. Typically, it takes around 2 months, but if you have an existing home loan with the bank, it could take up to 4 months. So a home equity loan is definitely not suitable for emergencies.
3. Can I use my CPF to repay a home equity loan?
Unlike a home loan, you will not be able to use your CPF savings to repay a home equity loan. This means your cash flow will be affected, despite the low interest rates and long tenure of the home equity loan. Make sure you set aside enough funds to repay the home equity loan.
4. Why are the interest rates for home equity loans so low?
A home equity loan is secured against your home’s equity, so banks are more willing to offer lower interest rates than for most other types of personal loans.
5. Can a property bought in trust for a child be used for a home equity loan?
No.
If you are unsure whether you are eligible for a home equity loan, please contact us, and we will provide you with professional advice.
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