You can borrow money from a bank with your property as a collateral. This is a neat trick when you want to “borrow” cash to finance another property, or when you have somewhere better to invest.

It is NOT applicable to HDB, only for private properties.

How does it work?

You are still subject to 75% LTV and TDSR. The amount that you can borrow is

75% x Property Value - Outstanding Loan - CPF (including accrued interest)

This is a separate loan to your outstanding home loan, but use must use the same bank.

TDSR rules still apply, while interest rate will be same as any home loan.

Equity Loan is not considered another home loan, so it doesn’t affect your LTV (eg. 2nd home loan is 45% LTV). But that depends on the bank. OCBC & UOB don’t consider it as home loan, while SCB does. Do check with your bankers.

No TDSR if total LTV < 50%

There is a way to not be subjected to TDSR.

If the equity loan amount + outstanding loan is less than 50% of the property value, you won’t be subjected to TDSR.

Aka Mortgage Withdrawal Loan (MWL). This is a rule relaxed by MAS so as to meet the needs of borrowers who need the flexibility to monetise their properties in their retirement years, i.e. to borrow against the value of their properties to obtain additional cash.

However, note that not all banks offer MWL eg. SCB does not provide MWL; equity loan subject to TDSR.

Timeline

Bank takes 3-4 weeks to disburse the loan, so you need to time this properly for your purchase.