Equity Loan

[Jonathan0503]

As my current property has appreciated in value, was offered by bank whom I mortgaged my property to take up an equity loan (cash out).

Can take loan of up to 75% of current value, less outstanding loan from bank and CPF utilised.

Interest rate approx 1.1%+sibor.

Any advise whether I should take up this offer?

And if I do, where do you think I should invest in?

My preference:

1) Low risk (value at least can be maintained over short to medium term)
2) Return of approx 4+%
3) Highly liquid (can offload easily)

[devilplate]

As my current property has appreciated in value, was offered by bank whom I mortgaged my property to take up an equity loan (cash out).

Can take loan of up to 75% of current value, less outstanding loan from bank and CPF utilised.

Interest rate approx 1.1%+sibor.

Any advise whether I should take up this offer?

And if I do, where do you think I should invest in?

My preference:

1) Low risk (value at least can be maintained over short to medium term)
2) Return of approx 4+%
3) Highly liquid (can offload easily)

U shd engage a pte investment banker instead rite?

Here only for ppty enthu

[land118]

As my current property has appreciated in value, was offered by bank whom I mortgaged my property to take up an equity loan (cash out).

Can take loan of up to 75% of current value, less outstanding loan from bank and CPF utilised.
)

Which bank offered u?

[radha08]

dont forget lawyer fees and u got to sign new contract so there might be lock in period...depend on how disiplined you are with investments and how well you handle $$ most people would probably splurge the extra $$ on a nice new car...evo/golf gti ...note there is a clause that states you cant use equity loan to buy another property... ...plus later on if interest rates go up ur equity loan also affected....

[evergreen]

Which type of investment you choose would depend on many factors. My preferred investments are gold savings account and government-linked companies blue chip stock on SGX that pay high dividend. But still, I have to do my research, monitor, buy/ sell at the right price and have a strong stomach. If you don't know what to invest in, it's better not to invest at all - at least until you have done your research.

NEVER trust anyone to advise you what to do with your money - not an investment banker, not an insurance agent, not your friends, not us
People will tell you all the good things about investments but you seldom hear from those who lose money because they usually hide their faces in shame. If you have herd mentality, it's better that you stay away from shares (including unit trust, savings plan and whatever nonsense products). Sometimes insurance companies offer you guaranteed interest with full capital protection if you hand them your money for a fixed number of years. That's the safest bet but the interest rates are low and it's relatively illiquid investment.

Inflation was 2.8% last year and your mortage interest rate is 1.6% so that's 4.4%. But 4% is your targetted return. Even if your investment can earn you 4% returns, you are still worse off than not cashing out. And if you add on the risk of losing your money, it's even less worthwhile.
Furthermore, note that the 1.6% interest you pay is on the total loan amount while the 4% target returns is on the cashed out portion.

Given the info you provided, my recommendation is to Not to cash out.
Note: Bankers and investment firms will not give you such advice because they all stand to earn money if you cash out and invest.

[lifeline]

Thanks evergreen for this very very useful sharing!
TS should reflect very hard and follow it.
You should take this up only for shortterm cash flow, with a view to returning it asap.

[devilplate]

dont forget lawyer fees and u got to sign new contract so there might be lock in period...depend on how disiplined you are with investments and how well you handle $$ most people would probably splurge the extra $$ on a nice new car...evo/golf gti ...note there is a clause that states you cant use equity loan to buy another property... ...plus later on if interest rates go up ur equity loan also affected....

No such clause la....which bank u take? Definitely can use the cash out money to buy another ppty!

[devilplate]

Thanks evergreen for this very very useful sharing!
TS should reflect very hard and follow it.
You should take this up only for shortterm cash flow, with a view to returning it asap.

If u really dun hf much cash flow...gd to cash out some la...borrowing cost quite low la....if ppty or stock crash, den u got money to hoot wat...if not, how to benefit from every crisis

[lifeline]

If u really dun hf much cash flow...gd to cash out some la...borrowing cost quite low la....if ppty or stock crash, den u got money to hoot wat...if not, how to benefit from every crisis

You are right as well, only for guru like yourself who knows exactly what he wants. Important also to consolidate purchases too in between, before re-leveraging upwards. Otherwise may get caught in the buying frenzy and get hit "unaware".

[land118]

No such clause la....which bank u take? Definitely can use the cash out money to buy another ppty!

U are correct.

See article regarding equity financing on MAS guidelines:

http://jacksheo.wordpress.com/2011/0...operty-market/

http://www.asiaone.com/Business/News...17-258690.html

[devilplate]

You are right as well, only for guru like yourself who knows exactly what he wants. Important also to consolidate purchases too in between, before re-leveraging upwards. Otherwise may get caught in the buying frenzy and get hit "unaware".

So ultimately, only u noe urself better den anyone else.....

I tell smone to cash out to pay for his car instead of taking a car loan

[lifeline]

So ultimately, only u noe urself better den anyone else.....

I tell smone to cash out to pay for his car instead of taking a car loan

Agree we know ourselves better; though reminder intermittently is good.
Btw thought that better to hold for further capital appreciation, better returns this way, unless limited further upside for that development. As a guru, your call should be correct. Was it correct looking back?

[devilplate]

Agree we know ourselves better; though reminder intermittently is good.
Btw thought that better to hold for further capital appreciation, better returns this way, unless limited further upside for that development. As a guru, your call should be correct. Was it correct looking back?

Me not guru....

Btw, i dun understand ur question...

Oh i noe liao, wat i mean was i told tat sm1 to take equity loan out of his ppty to pay for his car instead of taking car loan

[lifeline]

Me not guru....

Btw, i dun understand ur question...

Oh i noe liao, wat i mean was i told tat sm1 to take equity loan out of his ppty to pay for his car instead of taking car loan

oic... from equity loan. Good guru advice!

[DC33_2008]

EQ loan is not my cup of tea.

[radha08]

No such clause la....which bank u take? Definitely can use the cash out money to buy another ppty!

ocbc

[radha08]

No such clause la....which bank u take? Definitely can use the cash out money to buy another ppty!

HMM that means kena smoke last year i went ocbc bank to ask bout equity loan the officer said i cannot use the loan to buy another property...dammshould have joined this forum earlier...

[sh]

HMM that means kena smoke last year i went ocbc bank to ask bout equity loan the officer said i cannot use the loan to buy another property...dammshould have joined this forum earlier...

You take the money out to use for whatever purpose you want right? How does the bank know that you buy another property. Go to abother bank for the 2 loan lah.

Though the 2nd property will kenna the 40% LTV . Not very enticing leh....

[qus]

How come the interest rate is so high? The spread over sibor.

[radha08]

You take the money out to use for whatever purpose you want right? How does the bank know that you buy another property. Go to abother bank for the 2 loan lah.

Though the 2nd property will kenna the 40% LTV . Not very enticing leh....

yup thats what i was thinking too just transfer fund to my brothers name then ask my brother open check for me to pay for downpayment...how to catch...must have been some newbie officer that attended to me anyway like i said forum is the place all kind of experts here.... ...even got geylang experts at sammyboy forum....

[Jonathan0503]

Which bank offered u?

SCB

There's no restriction on what you can use for the fund. Hence, property also can.

That's why I'm thinking of investing in something less risky, can get a decent return for the short/mid term and at least maintain it's value. And if property market make a turn downwards, can use this money to buy another property

[devilplate]

SCB

There's no restriction on what you can use for the fund. Hence, property also can.

That's why I'm thinking of investing in something less risky, can get a decent return for the short/mid term and at least maintain it's value. And if property market make a turn downwards, can use this money to buy another property

Pls share wif us if u found any gd lobang....many of us here holding some banana notes too

[land118]

SCB

There's no restriction on what you can use for the fund. Hence, property also can.

That's why I'm thinking of investing in something less risky, can get a decent return for the short/mid term and at least maintain it's value. And if property market make a turn downwards, can use this money to buy another property

Ok, perhaps u can look at prefential shares of UOB and OCBC, which are traded on SGX, there's one that offering 5.05% and 5.1% respectively. Also, u can also look at Hyflux preferential shares traded on SGX, giving 6%. Nothing is guaranteed but these seem less risky..., best u do your own homework....

[Jonathan0503]

Ok, perhaps u can look at prefential shares of UOB and OCBC, which are traded on SGX, there's one that offering 5.05% and 5.1% respectively. Also, u can also look at Hyflux preferential shares traded on SGX, giving 6%. Nothing is guaranteed but these seem less risky..., best u do your own homework....

Thanks for the advice.

I have someone who suggested OCBC preferential shares as well

[Mbanker]

How come the interest rate is so high? The spread over sibor.

Exactly!

Citibank is offering 1mth sibor + 0.7% .

[land118]

Thanks for the advice.

I have someone who suggested OCBC preferential shares as well

Think SCB rate u get not competitive. Most foreign banks should be able to give u Sibor+ less than 1%, w/o lock-in for loan quantum of $500k & above, unless your loan quantum is really small.

[amk]

OP mentioning this pty still mortgaged. Perhaps the cash out amt is not big enough

[Jonathan0503]

Think SCB rate u get not competitive. Most foreign banks should be able to give u Sibor+ less than 1%, w/o lock-in for loan quantum of $500k & above, unless your loan quantum is really small.

But is it equity loan or normal mortgage loan?

[land118]

But is it equity loan or normal mortgage loan?

It doesn't really matter. Just the terminology. Some Bank do not have a specific term for property equity loan but will be willing to help you unlock the value of your property. U may try HSBC, their spread is lower than 1%.

[newbie11]

take note that banks may loan u up to 60 or 70 LTV. after minus existing loan, cpf used, not much may be left. worst, u burst DSR. so many factors come into play. having the best rates is the easiest way to select.. but i think best way is to find out which bank can offer u highest LTV to get max equity loan.. and i cfm equity loan can be used for anything. MAS was mentioned in papers abt discouraging but thats all.. MAS is not a regulatory body in this sense.