Most owners who look into an equity loan start with the wrong number. They take the property's value, subtract the mortgage, and assume the rest is available. The CPF you used to buy the home is the line that usually shrinks it.
Direct answer: An equity term loan lets a private property owner in Singapore borrow cash against the home without selling. Total borrowing, including CPF used plus accrued interest, is capped at 75% of the bank's valuation. If total loans stay at or below 50% of valuation, TDSR is not applied.
How Much You Can Borrow: The Three Ceilings
The bank applies three limits and the lowest one wins. Most people only know about the first.
| Ceiling | The rule |
|---|---|
| Loan-to-value | Outstanding loan + new equity loan + CPF used (with accrued interest) must not exceed 75% of the bank's valuation |
| Debt servicing | If total loans exceed 50% of valuation, the 55% TDSR cap applies, assessed at the MAS medium-term rate |
| Tenure and age | Banks cap tenure by your age and the remaining lease, which raises the instalment for older borrowers |
Source: MAS rules on mortgage equity withdrawal loans, clarified in 2020 and restated in a written parliamentary reply in 2026. Individual bank policies on age and tenure vary.
A Worked Example
Take a condo valued by the bank at S$2,000,000, with S$400,000 still owed and S$300,000 of CPF used for the purchase, including accrued interest. This is a Tier 3 illustration, not a real case.
| Step | Amount |
|---|---|
| 75% of valuation | S$1,500,000 |
| Less outstanding loan | S$400,000 |
| Less CPF used + accrued interest | S$300,000 |
| Maximum equity loan | S$800,000 |
| Borrowing that stays inside the 50% line (no TDSR) | up to S$600,000 |
The owner who expected S$1.6 million of equity can release S$800,000 at most, and only S$600,000 without an income test. CPF counts in the loan-to-value test but not in the 50% TDSR threshold, which is why the two numbers differ.
Why the 50% Line Matters Most for Retirees
The income test that catches retirees and the self-employed
Above 50% of valuation, the bank must show your total monthly debt stays within 55% of income at the stress rate. Retirees, and business owners with variable declared income, often fail that test even with a fully paid home. Staying inside the 50% line is frequently the difference between approval and rejection.
Below it, the bank still needs to be satisfied you can repay. Having no TDSR test is not the same as having no credit assessment.
What an Equity Loan Costs
Rates, fees and the lock-in
Equity term loans are priced off SORA, like most floating home loans. Three-month compounded SORA was about 1.19% in early September 2026 (PropertyNet.SG). Spreads on equity loans are usually a little wider than on purchase loans, so ask for the all-in rate in writing and compare two or three banks.
Add legal fees for the new mortgage charge, a valuation fee, and any lock-in penalty, typically around 1.5% of the amount redeemed early. Personal loans and credit lines cost far more, which is why an equity loan is often the cheapest borrowing available if you qualify. Speak to a licensed financial adviser for advice specific to your situation.
Equity Loan, Cash-Out Refinance or Sell?
Four ways to raise cash from a property, compared
| Option | How it works | Best when |
|---|---|---|
| Equity term loan | Separate lump-sum loan secured on the property | A defined need with a clear repayment source |
| Cash-out refinance | Replace the mortgage with a larger one | Your current loan is out of lock-in anyway |
| Bridging loan | Short-term loan until a sale completes | You have already sold, or are about to |
| Sell and right-size | Clear all debt, buy smaller | Income cannot support any new debt |
HDB flats cannot be used for bank equity loans. HDB owners aged 65 and above can look at the Lease Buyback Scheme or right-sizing with the Silver Housing Bonus instead.
Who This Suits, and Who It Does Not
Strong and weak fits
Suits: owners with a small or cleared mortgage and a specific, time-bound need; business owners bridging a gap with a known repayment date; retirees with enough CPF LIFE or rental income to service the loan comfortably.
Does not suit: anyone using it to pay other debts or cover monthly living costs. That moves unsecured risk onto your home. If the only repayment plan is "property prices will rise," there is no plan.
My Position
James's view: An equity loan is a good tool for a short, defined need. It is a poor substitute for a retirement income plan. If you need cash every month rather than once, run the right-sizing numbers first. Clearing all debt and freeing capital often leaves you with less risk and more cash than borrowing against a home you cannot afford to lose.
Frequently Asked Questions
Can I take an equity loan on an HDB flat?
No. Singapore banks offer equity term loans on private residential property only. HDB owners aged 65 and above can consider the Lease Buyback Scheme, or selling and right-sizing, which may qualify for the Silver Housing Bonus. Check eligibility with HDB.
Why does CPF reduce how much I can borrow?
MAS counts the CPF used for the purchase, plus accrued interest, as part of the total borrowing on the property for the 75% loan-to-value limit. Equity built with CPF is not available as cash, so the more CPF you used, the smaller the equity loan.
Is TDSR applied to equity loans?
Only if total borrowing on the property exceeds 50% of the bank's valuation. Below that line TDSR is not calculated, although banks still assess your ability to repay. Above it, the standard 55% TDSR cap applies at the MAS stress rate.
How is an equity loan different from cash-out refinancing?
An equity loan is a separate loan added on top of your existing mortgage. Cash-out refinancing replaces the whole mortgage with a larger one and pays you the difference. Refinancing makes more sense once your current loan is out of its lock-in period.
What happens if I cannot repay an equity loan?
The bank holds a charge over your property, so persistent default can lead to a forced sale. Before borrowing, write down exactly where every repayment will come from, and stress-test it at a higher rate than today's.
Your situation is different. Get it in writing.
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Sources (6)
- Monetary Authority of Singapore, MAS clarifies LTV and TDSR rules for residential mortgages and mortgage equity withdrawal loans, 2020
- Monetary Authority of Singapore, Written reply to parliamentary question on mortgage equity withdrawal loans, 2026
- Monetary Authority of Singapore, Total Debt Servicing Ratio framework
- CPF Board, Using CPF for housing: accrued interest and refund rules
- HDB, Lease Buyback Scheme and Silver Housing Bonus, 2026
- PropertyNet.SG, Singapore home loan rates and SORA tracker, updated 4 September 2026
This article is for informational and educational purposes only. It does not constitute financial, investment, or legal advice. Property investments involve risk. Past performance is not indicative of future results. Readers should seek independent advice from licensed professionals before making any property or financial decision. James Ong is a licensed real estate salesperson (CEA Reg No. R008385F) with PropNex Realty Pte Ltd and is not a licensed financial adviser.
James Ong | CEA Reg No. R008385F | PropNex Realty Pte Ltd
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