Equity Term Loan
If you have watched dramas, after the kid got into trouble, the dad took out the house title deed and went to the bank to get some money to solve the kid’s issues. What the dad is doing, is actually drawing out the excess equity in the property in the form of a housing loan. In reality, it’s not as easy as it is in the drama, this is regulated by MAS as well. Hence there are some rules to follow.
This is one of the cheapest way to borrow money from the bank using your property as a collateral. You do not need to sell the property to liquidate some cash (of course if you did not fulfill your loan obligation, the bank has to right to seize the property no matter how small the loan amount is). This method is only for private properties. HDB properties not allowed. Imagine you can borrow a sum of money paying current housing loan rates (current 1.38%, same payment terms as per normal housing loans) for a period of up to 30 years (depending on your age). Some people use this method to buy a car (auto loan – flat interest currently about 2.48%), or start a business, or pay off some debts or do some other things. You should always consider carefully the usage of the loan and the ability to repay it before committing! An example is you shouldn’t select a 30 years loan tenure if you intend to use it to buy a car.
To explore the possibility of cashing out.