The cheapest loan you can get — with the strictest job description

An equity term loan — MAS's official name is a Mortgage Equity Withdrawal Loan — is a cash loan secured against the paid-up value of a private property. Because the security is real estate, it prices at housing-loan rates rather than the 6–8% of a personal loan, making it the cheapest large-sum borrowing available to most owners. But the quantum is smaller than your paper equity suggests, the repayment is cash-only, and MAS prohibits banks from granting it for the purchase of residential property — three constraints this guide takes in turn.

The maximum in one formula

Each deduction has a reason. The gearing cap is the same MAS loan-to-value discipline that governs purchase loans: total secured borrowing on the property may not exceed 75% of its current bank valuation — and it is the bank's appointed valuer, not your own estimate, that fixes the figure. The outstanding loan already occupies part of that ceiling. And the CPF deduction — principal plus the 2.5% per annum interest it would have accrued — exists because the CPF Board holds a charge on the property, ranking ahead of any term loan, for the refund due on a future sale. Without that deduction, a cash-out would be a back door for converting protected retirement savings into spendable cash.

How much can you actually cash out? A worked example

Worked illustratively: an owner holds a condominium the bank values at $1.5 million, with a $200,000 housing loan outstanding, having used $100,000 of CPF with $20,000 of accrued interest (both figures are on the CPF property statement). Paper equity is $1.3 million. The bank's arithmetic:

Two readings. First, $1.3 million of paper equity becomes $805,000 of usable credit — a 38% haircut before any credit assessment, and this owner used CPF lightly. An owner who serviced the mortgage heavily from CPF for fifteen years can find the accrued-interest line alone exceeding $100,000; long ownership grows both the valuation and the deduction. Second, the 50% band: keeping total borrowing at or below 50% of valuation — here, cashing out up to $430,000 — exempts the loan from the TDSR assessment entirely, which is why owners with thin or retired income often size to that line rather than the maximum.

What can the money be used for — and what can't it?

The permitted uses are broad: investment capital, business funding, education, renovation, consolidating higher-interest debt (replacing an 8% personal loan with a ~2.6% secured one is the classic case). The prohibited use is singular and absolute: banks are prohibited by MAS from granting a home equity loan — or any similar credit facility — for the purchase of residential property. The cash-out is not a route to a second-home downpayment, and banks screen the stated purpose at application. Owners planning a portfolio move should note the distinction with decoupling: decoupling restructures who owns the current property so the next one can be bought at first-property ABSD with legitimate funds; an equity loan merely raises cash, and that cash is barred from the purchase. The duties on any next purchase are unchanged either way — the stamp duty calculator prices them.

Who qualifies — and who doesn't

Private residential property owners — condominiums and landed — can apply at any time, subject to the bank's valuation and credit assessment. Executive condominium owners qualify only after the 5-year Minimum Occupation Period. HDB flat owners cannot: HDB rules bar flats from being used as collateral for cash-out financing, full stop — a fully paid flat is not an ATM, and eligibility questions on HDB monetisation options (such as the Lease Buyback Scheme) belong to HDB.gov.sg. One structural point catches many applicants: a property cannot be mortgaged to two banks at once, so the term loan comes from your existing mortgagee — or you refinance the entire package to a new bank and gear up in the same exercise, which is when the current package rates matter most.

The servicing reality: cash only, at your age

Unlike a housing loan, an equity term loan cannot be serviced with CPF — every instalment is cash from take-home income. Above the 50% band, the instalment must also clear TDSR at 55% alongside existing commitments, assessed at the 4% stress rate (test the position in the affordability calculator). Tenure is capped like a housing loan, and borrowing past age 65 tightens the limits — a real constraint given that the typical equity-loan borrower is an older owner of a largely paid-up property. The uncomfortable pairing is common: the owners with the most extractable equity are often those with the least income runway to service the extraction.

Common mistakes and edge cases

Budgeting off paper equity. The worked example's 38% gap between paper and usable equity is typical; owners who committed funds before running the four-line formula find the shortfall at the worst time. Get the CPF property statement first — the accrued-interest figure surprises almost everyone.

Forgetting the setup cost and timeline. Legal and valuation fees run roughly $2,500–$4,000 and processing takes around 2–4 months. Cashing out $80,000 to bridge a three-week gap is the wrong tool; cashing out too little and repeating the exercise pays the fees twice.

Ignoring the downside of the security. The loan is secured on your home: default risks repossession, and a sharp fall in valuation can trigger a top-up demand. Borrowing cheap to invest is a leveraged position — the spread can go negative.

Assuming the bank must lend the formula amount. The formula is the ceiling, not an entitlement. Credit profile, income, property type and the bank's own policy set the actual offer, which can be materially lower.

Where the current numbers live

The moving parts of this guide are rates and valuations, and both live elsewhere: the equity term loan calculator runs the four-line formula with your figures and shows the 50% TDSR-exempt band; the mortgage rates table tracks the packages an equity loan will actually price against; and the TDSR guide covers the income assessment that applies above the 50% band. If income is the binding constraint, the pledging guide covers the asset-recognition route.

Verdict: cheap money, narrow job

An equity term loan is the right tool for exactly one shape of problem: a large, productive cash need — business capital, expensive-debt consolidation, a genuine investment plan — held by the owner of a private property with real paid-up value and the cash income to service a new instalment. It is the wrong tool for buying property (prohibited), for HDB owners (ineligible), for small short gaps (fees and months of processing), and for owners whose income has already retired even if their equity has not. Run the four lines in the calculator, get the CPF statement, and let the 50% band — not the 75% maximum — be the first number you consider.

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