Property loans empower businesses to leverage the value of their residential or commercial properties, offering an additional source of cash flow for day-to-day operations or strategic investments. The amount you can cash out is determined by a combination of three crucial factors: loan-to-valuation (LTV) ratio, outstanding home loan amount, and total CPF funds used. It’s important to consider general regulatory limits, such as the total debt servicing ratio (TDSR). Additionally, businesses must demonstrate the capability to meet future monthly debt repayments.
Private Residential, Commercial & Industrial Properties
As low as 3.98% p.a., 2 year fixed
Up to 25 years (Principal and Interest Payment)
Up to 3 years (Interest Servicing only)
The amount available for withdrawal is determined by a combination of three main elements: loan-to-valuation (LTV) ratio, outstanding mortgage balance, and total CPF savings utilized. Additionally, individuals may need to adhere to overarching regulatory thresholds such as the total debt servicing ratio (TDSR). Furthermore, businesses need to demonstrate the capacity to meet upcoming monthly debt obligations.
| LTV | Banks / NBFI | Alternative Lenders |
|---|---|---|
Residential | 70% | 85% |
Commercial | 70% | 80% |
Shophouses | 70% | 80% |
Industrial | 60% | 70% |
The Loan-to-Value (LTV) ratio is determined by the maximum loan amount a lender can offer compared to the property’s valuation. For instance, having a 70% LTV on a property valued at $1 million indicates that the maximum loan amount available is $700,000. Consequently, a higher LTV allows for a greater cash-out option. Check the LTV percentages in the table for various property categories.
By considering the Loan-to-Value ratio (LTV), the total cash withdrawn is currently a percentage of your property value, minus the remaining loan amount and the CPF funds utilized for property acquisition (including accrued interest).
Example: George has a condo currently valued at $1 million with an outstanding loan of $300,000. He also utilised a total of $100,000 including accrued interest to finance his condo. This means the maximum amount he can cash out is [LTV 70% x S$1,000,000 (market value)] – $300,000 (outstanding loan) – $100,000 (CPF Utilised) = $300,000.
A comprehensive analysis of the advantages and disadvantages.
| Property Backed | Bank | Non-Bank |
|---|---|---|
LTV | 60-70% | 60-85% |
Interest Rate | 3.98% p.a. onwards | 7.5% p.a. onwards |
Tenor | Up to 25 years | Typically up to 5 years (able to stretch to 15 years) |
Repayment Schedule | Principal + interest monthly | Principal + interest monthly OR
Interest servicing only |
Processing Fee | 0% | 0.5-1.0% |
Upon careful consideration, it’s evident that while banks provide cost-effective options, non-bank alternatives offer greater flexibility. This encompasses a higher Loan-to-Value (LTV) ratio and the option for interest servicing. The latter can be a pivotal factor, significantly reducing your monthly repayments and enhancing your overall cash flow.
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