Wednesday, December 16, 2015

Cash Out Home Equity Loans or HDB Flat as Collateral? Nope.

I learnt something new today.  That it is actually possible to take a cash out or credit facility on your home by refinancing it.  People can use this additional leverage when they have largely paid up property and wish to make use of the lower home mortgage rates to pay off either existing loans or even invest in other instruments (e.g. REITs) which might give a higher returns. '

These are quite common overseas, here is a typical example
https://www.hsbc.com.au/1/2/home-loans/products/equity

But also realised that one is also not allowed to take a credit loan out of your HDB flat.  Basically:

"HDB flats can only be mortgaged to banks or financial institutions to finance the purchase. HDB owners are not allowed to use their HDB flat, which has been fully paid for, as collateral to raise credit facilities."

So unless you own a private property, you most probably cannot take a cash out home loan to tap on the low mortgage rates now.

11 comments:

  1. Any idea how many % we need to pay up for the property before we can take this loan?

    ReplyDelete
    Replies
    1. Banks will probably be willing to lend you an amount that is as if you are buying your own home. All the normal credit checks should apply. My guess only.

      Delete
  2. No hard & fast rule. General rule of thumb, the amount likely to be extended will be 70-80% loan to current valuation of your private property minus current outstanding loan

    ReplyDelete
  3. So unless you own a private property, you most probably cannot take a cash out home loan to tap on the low mortgage rates now.

    ReplyDelete
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