A home equity loan in Singapore lets the owner of a private property borrow cash against the home’s value. MAS calls it a mortgage equity withdrawal loan. The total secured on the property, including CPF used, cannot exceed 75% of its value, and HDB flats are not eligible.
The rate is far lower than a personal loan’s. The price of that lower rate is that the home becomes security for the debt.
A caution on borrowing: this turns housing wealth back into debt, often late in working life. If repayments fail, the lender can sell the property.
What a Home Equity Loan Is
Equity is the part of the home you own outright: its market value, less what is still owed on it. An equity loan borrows against that part.
Banks use several names for it, including equity loan, term loan and cash-out refinancing. Whatever the label, MAS treats a loan secured on the value of your residential property as a mortgage equity withdrawal loan and applies the rules below.
MoneySense classes it as a secured loan. If the collateral’s value drops below the loan amount, you may need to top up or pay down part of the loan. If you do not repay, the lender can repossess and sell the asset.
The MAS Rules on a Home Equity Loan in Singapore
| Rule | What MAS says |
|---|---|
| Eligible property | Private residential property. Not HDB flats; not executive condominiums within the minimum occupation period |
| Loan-to-value limit | 75% if you have no housing loan on another residential property; 45% if you have one or more |
| What counts towards the limit | The equity loan, any other loan secured on the same property, and CPF monies used |
| Maximum tenure | 35 years |
| Total Debt Servicing Ratio | 55% of gross monthly income, unless total loans on the property are 50% or less of its current market value |
| Mortgage Servicing Ratio | Does not apply |
The loan-to-value limits apply to applications made on or after 6 July 2018.
The CPF line is the one most owners miss. Money you withdrew from your Ordinary Account for the property counts against the 75%, even though it is not a debt to a bank.
When TDSR applies, MAS requires lenders to test your repayments at the higher of 4% or the loan’s highest rate for residential property loans, and to count car loans, student loans, renovation loans, credit card debt and other borrowing.
How Much Could You Cash Out? A Worked Example
An illustrative couple own a condominium valued at S$1.5 million. They owe $400,000 on the home loan and have used $200,000 of CPF for it. They have no other property loan.
- 75% of $1.5 million: $1,125,000
- Less outstanding loan and CPF used: $400,000 + $200,000 = $600,000
- Maximum equity loan under the limit: $525,000
That is the regulatory ceiling. The lender’s valuation, their age and their income may reduce it.
The TDSR threshold. Half the property’s value is $750,000. With $400,000 already owed, an equity loan of up to $350,000 keeps total loans at or below 50%, so TDSR would not be calculated. Above that, the 55% test applies to all their debts.
What It Costs
Equity loans charge interest on a monthly-rest basis, like a home loan. Interest falls as the balance falls, and the advertised rate is close to the EIR before fees.
We do not quote bank rates here, as packages change often. Assume, for illustration only, that the couple borrow $200,000 at a constant 3% a year.
- Over 10 years: about $1,931 a month; total interest about $31,700
- Over 20 years: about $1,109 a month; total interest about $66,200
- Over 20 years at 4%: about $1,212 a month; total interest about $90,900
Two points follow. A long tenure makes a large loan look small each month while doubling the interest. And most packages are floating or fixed only for a few years, so the rate can rise. At 4% the same loan costs about $24,700 more.
Add legal fees and a valuation fee, and check for a lock-in period and an early repayment charge. Our mortgage repayment calculator shows the instalment at other rates and tenures.
The short version: A home equity loan is cheap money secured on the place you live. The limit is 75% of the property’s value less existing loans and CPF used. Test the instalment at a higher rate, and borrow only for something whose value outlasts the debt.
The Risks to Weigh
- Your home is the collateral. An unsecured debt that goes wrong damages your credit record. A secured one can cost you the property.
- Rates move. A floating-rate loan over 20 years will see several interest rate cycles.
- Property values move too. If the valuation falls, the lender may ask you to reduce the loan.
- It delays being debt-free. An equity loan taken at 50 with a 20-year tenure runs to 70. Our retirement timeline calculator shows what a continuing instalment does to your plans.
- CPF refunds on sale still apply. When the property is sold, CPF used plus accrued interest goes back to your account before you see cash. A larger outstanding loan leaves less. See CPF accrued interest when you sell.
- Borrowing to invest magnifies losses. Investments can go down as well as up, while the loan must be repaid either way.
Options for HDB Owners and Others
HDB flats cannot be used for an equity loan. Depending on age and circumstances, HDB owners look at different routes:
- Lease Buyback Scheme for eligible older owners, which sells part of the remaining lease back to HDB. See our guide to the Lease Buyback Scheme and Silver Housing Bonus.
- Unsecured borrowing for smaller sums: compare personal loans on EIR.
- A renovation loan if the purpose is home works: see renovation loans.
For private owners whose aim is to clear expensive unsecured debt, a debt consolidation plan may do the job without putting the home at stake.
What To Do Next
- Estimate your limit: 75% of a realistic valuation, less the outstanding loan and CPF used. Your CPF statement shows the amount withdrawn for the property.
- Ask two or three banks for the rate, how long it is fixed, the lock-in, fees and total interest over your intended tenure.
- Test the instalment at 4% or more, alongside your existing mortgage, in our budget planner.
- Write down what the money is for and when the loan will be fully repaid.
