• Home Loan BYTES FROM OUR KITCHEN

    Home Equity Loan Singapore

    A home equity loan allows you to apply for a loan by using your home as a collateral or security. It is a type of loan wherein you can borrow money from a bank or a financial institution against the value of your home.

    A home equity loan does not require you to spend the loan amount strictly for home and related expenses. You can spend the loan amount for any purpose/s.

    A home equity loan in Singapore is also known as property equity loan/financing by different financial institutions.

    Features of Home Equity Loans in Singapore

    Here are some common features of home equity loans offered in Singapore:

    • You can choose a loan with a lock-in period or one without a lock-in period.
    • You can choose from fixed, variable and SIBOR interest rate packages.
    • You can get up to 80% financing of the value of your home.
    • You can apply for a home equity loan for up to 70 years of age.

    How a Home Equity Loan Works

    With a home equity loan, you will have to offer the value of your home as collateral to the bank or financial institution with whom you wish to take up the loan. If the value of your home is more likely to appreciate, the bank may choose to approve a higher loan quantum.

    The bank will offer you a one-time lump sum amount that you can use for any purpose you see fit. You can choose a fixed or variable interest rate package depending on which your monthly payments will be set. There may be additional fees and charges involved such as processing fee, early prepayment fee, late payment fee, etc. which differ from bank to bank.

    What you need to remember here is that approval on a home equity loan is not guaranteed. Just like any other loan, the bank will evaluate your application first before making a decision regarding the approval of your loan. However, if you have a bad credit score, a home equity loan can increase your chances for approval as there is collateral involved with this loan.

    Benefits of a Home Equity Loan

    There are several benefits of applying for a home equity loan including the following:

    • You can use the money from the loan for various purposes, allowing you easy access to cash.
    • Interest rates on home equity loans are lower than that of personal loans and cash advances because this is a secured loan.
    • Many home equity loans offer a fixed rate of interest. This way you will have to make a fixed payment towards your loan on a month-on-month basis allowing you to better manage your other expenses.
    • Home equity loans are easier to get approval on for those who have a bad credit score because this is a secured loan.
    • You can borrow a large amount of money under a home equity loan because you are offering the value of your house as collateral to the loan. Hence, your loan amount will be pegged to the value of your home.

    What you Need to Consider Regarding a Home Equity Loan

    Here are some aspects of a home equity loan that requires due consideration:

    • As this loan is secured by the value of your home, in case of default on payments, the bank or financial institution will have the right to seize your property.
    • A home equity loan will put you back in revolving debt. If you have spent a considerable amount of time and money paying back a home loan and you have finally got full ownership of your home, then you are losing it again for another loan.

    Banks in Singapore Offering Home Equity Loans

    The following banks in Singapore offer home equity loans to customers:

    • HSBC
    • CIMB
    • UOB

    Frequently Asked Questions

    1. Is there a difference between a home loan and a home equity loan?

      A. A home loan is a loan that you apply for the purpose of purchasing a new home or refinancing an existing home loan. It is typically applied for before purchasing a house. A home loan can only be used for the purpose of buying a home. A home equity loan on the other hand can be used for any purpose as seen fit. The approved loan amount will depend on the value of your home. However, in both cases, the house will be used as collateral for the respective loans.

      You can apply for a home equity loan only after owning the house. You can therefore not apply for a home equity loan if you are currently repaying your home loan.

    2. If a home equity loan can be used for any purpose just like a personal loan, is it better to apply for a personal loan instead?

      A. This will depend on what the purpose of your loan is. If you are looking for a small loan amount and tenure to be used for a trip or vacation, then a personal loan is a better option. If you are looking for a larger loan amount with longer tenures to start a business or you have a bad credit score, then a home equity loan is a better option. The main difference between a personal loan and a home equity loan is that the latter is a secured loan offering lower interest rates and longer tenures.

    3. What will happen if I am not able to keep up the payments on my home equity loan?

      A. As a home equity loan is a secured loan, in case you default on the loan, the bank may exercise the right to seize your home. It is therefore advisable to only apply for a loan amount that you can afford and repay even if the value of your house can get you a larger loan quantum. Also, there are online home loan calculators available that can help you compute your monthly instalments throughout your loan tenure. This will give you a better idea of how much you can borrow.

    4. What is the minimum age to apply for a home equity loan?

      A. Most banks require you to be at least 21 years of age before you apply for a home equity loan.

    5. Will offering collateral suffice to get a home equity loan approved or do I have to meet other income criteria?

      A. In addition to offering your house as collateral for the home equity loan, you will have to meet certain eligibility criteria including minimum age, minimum income and other criteria such as minimum loan amount. Documentation for the same including documents to verify your ownership of the house will be required to complete the application process for a home equity loan. 

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