Home Equity Loan FAQs

What’s the difference between home equity and term loans?

The difference between the two is that an equity loan helps you tap into the value of a property that has been fully paid for. A term loan helps you do the same for a property that has not been fully paid for.

What should you know before applying for a home equity
or term loan?

If the value of your property appreciates greatly, banks will be more agreeable to lending you more money – because your home is used as collateral for a home equity or term loan. These loans are an easy way to free up extra cash at a low prevailing mortgage interest rate so you can strengthen your investment portfolio, start a business, or handle a financial emergency.

How does cash-out refinancing work?

Let’s say the property you purchased in 2008 at $500,000 is now worth $900,000. With a home equity or term loan, you can now borrow anywhere from 70%-80% of your property’s current market value, minus any remaining loan amount or CPF used.

Only private properties, not HDB flats, are eligible for home equity or term loans. Also, the current market value is determined by the loaning bank, but we can get the valuations and help you find the lowest interest rate.

What are home equity and term loan tenures like?

The tenures for home equity and term loans are typically 75 years minus your current age, minus the total number of years spent servicing your home loan. However, banks can differ in how they calculate tenures.

How much can you get with a home equity or term loan?

That depends on three important factors:

• A) 70%-80% of your property’s current market value
• B) Your outstanding home loan amount (if any)
• C) The total amount of CPF funds used to purchase your property
• Disbursement fee that may vary

So your total amount you can borrow depends on this equation:

A minus B minus C = the total amount you can borrow for a home equity or term loan.

What is the lowest interest rate you can get?

Banks are always revising their interest rates. But MoneySmart compares interest rates among Singapore’s top banks to find you the absolute lowest rate available.