Use Paid Up Property As Collateral To Loan $?

[wildfaye29 0]

Hi, we have a fully paid up property.

We need some cash ($300k) for other purposes. Can we use the property as collateral to obtain a loan?

The mkt value of the property is 1.5M.

What are they types of loan avail? and rates?

Help appreciated!

Thanks!

[matrix0405 0]

You can pledge as collateral for loan. Or you can try Asset line; all local banks have this.

[blue_skies 3]

Hi, we have a fully paid up property.

We need some cash ($300k) for other purposes. Can we use the property as collateral to obtain a loan?

The mkt value of the property is 1.5M.

What are they types of loan avail? and rates?

Help appreciated!

Thanks!

Can be done. Even if the ppty is not fully paid up but the value has increased (i.e. valuation price), you can still use it as a collateral.

When I enquired with UOB rgd this, the bank officer provided the following info. But this was before the new housing rules came into place, so not sure if the banks are also stricter about it now.

As a general guide, the bank can consider granting an additional loan secured against a property if:

- The total CPF used towards your property + existing facilities + new facilities does not exceed 60 to 70% of the valuation of the property.

- The total commitments of the borrowers including instalment for the additional facility does not exceed 40% to 50% of the monthly income of all the borrowers.

I understand you can opt for SOR rates.

[bepgof 20]

It is not a loan but called "secured overdraft facility". All full-licensed banks have this product/service. It has to be customised based on one's assets & earning ability. One has to use either their FD, shares, or property(if not fully paid, cannot re-mortgage)...as collateral. Singapore's law not allow two "lenders" on one property which used as collateral.

Singapore Post has the lowest interest rate of 1% per month or 12% per annum!

This facility work much like "credit online", except needing collateral - one lump sum allocated, pay interest on used cash only. Not too sure whether the interest is computed based on daily-rest, weekly-rest or monthly-rest. The approval process may take some time.

Hi, we have a fully paid up property.

We need some cash ($300k) for other purposes. Can we use the property as collateral to obtain a loan?

The mkt value of the property is 1.5M.

What are they types of loan avail? and rates?

Help appreciated!

Thanks!

Edited February 15, 2011 by bepgof

[Jgal 0]

Hmm.. could TS get a mortgage loan instead ? Since it already paid up ?

Let say, lawyer fee is 3%. Loan interest is 1.5% with no lock-in. No penalty for early redemption.

For loan period of 1 yr, TS probably only need to spend 5% interest on a loan of 300k compared to 12%. But TS probably need a income that allow him to borrow 300K .. Is there any other cost involved?

[blue_skies 3]

It is not a loan but called "secured overdraft facility". All full-licensed banks have this product/service. It has to be customised based on one's assets & earning ability. One has to use either their FD, shares, or property(if not fully paid, cannot re-mortgage)...as collateral. Singapore's law not allow two "lenders" on one property which used as collateral.

Singapore Post has the lowest interest rate of 1% per month or 12% per annum!

This facility work much like "credit online", except needing collateral - one lump sum allocated, pay interest on used cash only. Not too sure whether the interest is computed based on daily-rest, weekly-rest or monthly-rest. The approval process may take some time.

If I'm not mistaken, the secured OD facility is a bit different because you only pay interest on what you use.

The other loan (some banks call it home equity loan), is disbursed all at the same time, and interest is paid on the full amount that is disbursed.

The per annum interest for an OD facility is also generally higher than the home equity loan.

However, you can use your partially / fully paid up property as a collateral to obtain either of the above "loans", plus showing evidence of your earning ability (e.g. salary).

[blue_skies 3]

Hmm.. could TS get a mortgage loan instead ? Since it already paid up ?

Let say, lawyer fee is 3%. Loan interest is 1.5% with no lock-in. No penalty for early redemption.

For loan period of 1 yr, TS probably only need to spend 5% interest on a loan of 300k compared to 12%. But TS probably need a income that allow him to borrow 300K .. Is there any other cost involved?

The mortgage loan is similar to using the property as a collateral to obtain additional loan from the bank. For such a case, I think the bank subsidises the lawyer's fees so you may not need to pay it.

[bepgof 20]

Be it Equity Home Financing(UOB) or Assetline(DBS), they are actually a secured OD facility in principle. Banks can beautify this facility with many fanciful names but nature still the same - using borrower's assets (must be liquid enough to exchange into cash in case of default payment) as collateral. Lending bank does risk assessment onto borrower's assets, financial liabilities, earning power...to determin approve credit limit. Assets' type & nature determine the the interest rate, so all these need to be customised and take time to process. Interest will be charged for amount used.

Singapore law allows no partially paid property to be used as collateral for application of secured OD facilty under 2 different lenders(creditors). Reason is obvious in case borrowers run into bankruptcy. One can't use fully paid HDB unit as collateral for applying secured OD facility - I "think" so, because if one lands into bankruptcy, creditor can't force sell the unit under HDB rule. Singapore allows insurance and re-insurance business, but no "re-mortgage" and "re-re-mortgage" on property. The 3 cows story tells the pitfall of such.

Another area of concern is the "effective interest rate". CPF OA's 2.5% is "monthly-rest", if apportion it to "yearly-rest" would be 2.53%.

Likewise, believed the secured OD facility's interst calculation model is based on "weekly-rest" - used amount has to be top up within a week, if not (interest +used amount) would be added on and on every week, this is a typical case of licensed ah long.

Only " super desperator" will engage in secured OD facility.

If I'm not mistaken, the secured OD facility is a bit different because you only pay interest on what you use.

The other loan (some banks call it home equity loan), is disbursed all at the same time, and interest is paid on the full amount that is disbursed.

The per annum interest for an OD facility is also generally higher than the home equity loan.

However, you can use your partially / fully paid up property as a collateral to obtain either of the above "loans", plus showing evidence of your earning ability (e.g. salary).

Edited February 16, 2011 by bepgof

[bepgof 20]

He can't, unless he sells the house to someone and TS gets the sale proceeds.

In a typical mortgage home loan structure, cash is disbursed from bank A to bank B, CASH not go into Mortgagor's pocket. If mortgage loan or whatever loans' $ can go into one's pocket directly, MAS must be not doing his job well.

Since TS has obtained the property title, he can arrange for a secured OD facility, taking his property as collateral, of course he needs to find out what's the cheapest way of borrowing $. The amount needed & interest rate is borrower's credit worthiness dependent, borrower's history with the bank.....

Or he can arrange for unsecured OD facility which requires no collateral,like line of credit, of course the amount can be brrowed would be very much smaller.

When property is concerned, the cavaet( a legal notice of claim of property tiltle)is kept by SLA. To generate a caveat, need a lawyer (therefore lawyer fee is needed)Read & understand the below

http://www3.nationproperty.com.sg/npp2/EF_REF_stp9.aspx

Hmm.. could TS get a mortgage loan instead ? Since it already paid up ?

Let say, lawyer fee is 3%. Loan interest is 1.5% with no lock-in. No penalty for early redemption.

For loan period of 1 yr, TS probably only need to spend 5% interest on a loan of 300k compared to 12%. But TS probably need a income that allow him to borrow 300K .. Is there any other cost involved?

Edited February 16, 2011 by bepgof

[wildfaye29 0]

Hi all, thanks for your replied.

I have enquired with UOB and DBS and understand that this is essentially called Home Equity Financing. The bank will loan 60% of the valuation of the property, however, any CPF utilised and accrued CPF interest must be deducted to derived at the actual loan to be disbursed.

Rates are very attractive, at approx 1.5% p.a. and you can loan up to the max tenor based on your age.

Cheers!

[matrix0405 0]

1.5%, will that be cheaper than car loan? If it is might as well take secured loan instead of car loan. What is the interest rate for car loan now?

[beemer75 0]

1.5%, will that be cheaper than car loan? If it is might as well take secured loan instead of car loan. What is the interest rate for car loan now?

car annualise it will be ard 4% region? seems like its worthwhile to take this collateralised loan to pay for car.

savings will be quite substantial.

am i missing anything?