Home Equity vs Term Loan

Home equity is making a return for a property in which you have paid for, in full. Consequently, a term loan is similar except that it hasn’t been paid for.

Before applying for a loan

If you have a property which has increased in value, your local bank may be willing to lend you extra money by using it as a deposit of some sort. This would be feasible to free up extra money at low interest mortgage rates and is done through the refinancing of home equity/term loans. The cash may be used for personal means or starting your very own business.

Example:

Let’s say you bought a property in 2007 for $450, 000 and its value has increased to $850, 000. You can now take extra money from your local bank in the form of an equity or term loan for up to 70-80% of its current market rate.  However, only private properties qualify for such loans.

What is the maximum duration period for equity/term loans?

The maximum period for loan tenure is normally 75 years, deduct its current age with the total years spent paying the loan. Some banks may calculate the figures differently. The minimum amount for an outstanding loan is at $100, 000.

How much can I expect to get from cashing out?

To get a general idea on your maximum loan amount, you may use this calculation method:

Figure A = the percentage of your property’s market value

Figure B = the outstanding amount of your loan

Figure C = Total CPF amount allocated to your property

Cash-out total = A minus B minus C

Note: The current market value can be obtained through your bank’s valuation.

What are the expected rates for cashing out?

Mortgage interest rates are changed frequently by banks. Find a professional that can assist you in finding a bank with the lowest rates, enabling you to save your time and hard-earned cash.