The cheapest loan you can get — with tight rules on how you can use it

An equity term loan is a cash loan backed by a private property. MAS calls it a Mortgage Equity Withdrawal Loan. Because your home is the security, it prices at home-loan rates rather than the 6–8% a personal loan charges. That makes it one of the cheapest ways to borrow a large sum. Three limits come with it. The amount is smaller than the property's value suggests. Repayment must be in cash. And MAS bans banks from granting it to buy residential property. This guide takes them one at a time.

How is the maximum worked out?

Each deduction has a reason.

The 75% limit works like the loan-to-value rule on a purchase loan. All your secured borrowing against the property must stay inside 75% of its current bank valuation. The bank's own valuer sets that figure, not you.

Your outstanding loan already takes up part of that 75%.

The CPF deduction covers the CPF you used plus the 2.5% a year it would have earned. It is there because that money must go back into your CPF account when you sell. The CPF Board is paid before the bank. Without the deduction, you could turn protected retirement savings into spendable cash today.

How much can you actually cash out?

Take a worked case. An owner holds a condominium the bank values at $1.5 million. There is a $200,000 home loan still outstanding. They used $100,000 of CPF, which has built up $20,000 of interest. Both CPF figures sit on the CPF property statement. So the property is worth $1.3 million more than the loan on it. Here is how the bank works out what they can borrow.

Two things stand out. First, the gap. The property is worth $1.3 million more than the loan on it, yet only $805,000 comes out as usable cash. That is a 38% shortfall, and this owner used only a small amount of CPF. An owner who paid down the mortgage mostly with CPF over fifteen years can find the CPF interest alone tops $100,000. The longer you have owned the place, the bigger both the valuation and the CPF deduction get.

Second, there is a lower ceiling that skips the income test. Keep your total borrowing at or below 50% of the property's value and the TDSR income check does not apply. Here that is 50% of $1.5 million, or $750,000, minus the $200,000 loan, minus the $120,000 of CPF claims. That leaves $430,000. This is not just the cautious option. Owners with thin or retired income are often capped at that $430,000, because anything more means passing an income test they may not clear.

What can the money be used for?

Most uses are open to you. Investment capital. Business funding. Education. Renovation. Or clearing more expensive debt, which is the classic case: swapping an 8% personal loan for a secured one near 2.6%.

There is one thing you cannot do with it, and there is no exception. MAS does not allow banks to grant a home equity loan, or anything like it, to buy residential property. You cannot use the cash as a downpayment on a second home. Banks ask what the money is for when you apply.

If you are planning to buy another property, do not confuse this with decoupling. Decoupling changes who legally owns your current home, so the next one is taxed as a first property. An equity loan does not do that. It only raises cash, and MAS bars that cash from the purchase. Either way, the stamp duty on the next purchase works out the same. Our stamp duty calculator prices it.

Who qualifies for an equity term loan?

Owners of private condominiums and landed homes can apply at any time. The bank still has to value the property and check your credit.

Executive condominium owners qualify only after the five-year Minimum Occupation Period, the stretch you must live in the home before you can sell or borrow against it.

HDB flat owners cannot apply at all. HDB rules do not let a flat be used as security for this kind of loan. A fully paid flat is not an ATM. For other ways to unlock cash from a flat, such as the Lease Buyback Scheme, HDB.gov.sg is the right place to ask.

One point catches applicants out. A property cannot be mortgaged to two banks at once. So the loan has to come from the bank that already holds your mortgage. The alternative is to refinance the whole package to a new bank and borrow more in the same move. That is when the current package rates matter most.

How do you repay it, and what does age change?

A home loan can be paid from CPF. This one cannot. Every instalment must come from cash, out of whatever cash income you have: salary, rent, business income.

Borrow past 50% of the property's value and a second check kicks in. Your new instalment, plus every other debt, must fit inside 55% of your income before tax and CPF. The bank tests that at a 4% rate, higher than you would actually pay, as a safety margin. Our affordability calculator runs your own numbers.

The loan length is capped as it would be on a home loan, and borrowing past age 65 tightens the limits further. That bites here. The typical borrower is an older owner of a largely paid-off home. So the owners who can borrow the most often have the fewest working years left to repay it.

What mistakes do people make?

Budgeting off the property's full value. A 38% gap between what the home is worth and what you can borrow is common. Owners who plan around the full value usually find out too late, after signing a renovation contract or a business deal. Pull the CPF property statement first. The accrued-interest figure surprises almost everyone.

Forgetting the setup cost and the wait. Legal and valuation fees run roughly $2,500–$4,000. Processing takes around two to four months. Taking $80,000 to plug a three-week cash gap makes no sense. And borrowing too little means paying those fees twice when you have to go back.

Forgetting that your home is on the line. The loan is secured on your home. Miss the payments and you risk losing it. A sharp fall in valuation can also trigger a demand to top up the loan. Borrowing cheaply to invest only works if the investment earns more than the interest. Earn less and you do not simply miss out on profit. You lose money, because the return no longer covers what you owe.

Assuming the bank must lend the full amount. The formula gives a ceiling, not a promise. Your credit record, income, property type and the bank's own policy decide the real offer. It can land well below the formula.

Where do you check the current numbers?

Two things here change often: interest rates and property valuations. We keep those in tools rather than in this article. The equity term loan calculator runs the formula on your own numbers and shows your 50% ceiling. The mortgage rates table shows the rates an equity loan will be priced against. If income is your limit rather than property value, the TDSR guide explains the income test. The pledging guide covers another way to lift the income a bank will recognise.

So is an equity term loan right for you?

This loan fits one situation well. You own a private property with real equity in it. You have cash income to cover a new instalment. And you need a large sum for something productive: business capital, clearing costlier debt, or a real investment plan.

It fits four situations badly. Buying property, which is not allowed. HDB owners, who cannot apply. Small short-term gaps, where the fees and the months of waiting cost more than the gap. And retired owners with no income to service the instalment, however much equity they hold.

Start with the CPF statement, then run your figures through the calculator. Check what you can borrow inside the 50% ceiling before you look at the 75% maximum. That lower figure is what most owners actually qualify for without an income test in the way.

The short version

So what should you do with this? Order your CPF property statement before anything else. The accrued interest on that statement is the number that decides how much you actually get, and it is the one owners consistently underestimate. Then work out your 50% figure, not your 75% figure, in the equity term loan calculator. If you need more than that, check your income against the borrowing test first, because the bank will.

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