Can I Take a Loan on a fully-paid up Property?

[Dennis Ng]

[quote=kahhean]
Hi all,

Suppose I have a fully paid up property valuated at 500k. It means banks are willing to lend me money because if I don't pay up they can take over my property right? So,

1. What fraction of the valuation do they normally lend?

2. Does it matter if the property is HDB or private?

3. Does it matter if the property was paid up using CPF or cash?

Thanks.
[/quote]

Hi kahhean,
I'm speaking based on 15 years of bank lending experience.

1. banks can lend up to 80% of the current market valuation, subject to your income/liability qualify for loan.

2. if your fully paid-up property is HDB flat, the answer is HDB rules do not allow banks to lend you any money at all. only private properties can get Equity Loan.

3. yes, banks would have to deduct CPF used (including accrued interest of 2.5%) from the amount they are able to lend to you. eg. 80% of $500,000 is $400,000. If CPF utilised is $300,000, then bank can only lend you S$400,000 less S$300,000 or S$100,000 instead of S$400,0000.

If you only used cash to pay for this property, then amount of loan that can be granted is up to S$400,000 instead.

[MoonBB]

Hi Dennis

Has there been any changes to the HDB rules last few years on whether Banks can grant loans again on fully-paid HDB flats? Cos sad to say i've already fully paid mine using CPF....

Thanks!
MoonBB

Hi all,

Suppose I have a fully paid up property valuated at 500k. It means banks are willing to lend me money because if I don't pay up they can take over my property right? So,

1. What fraction of the valuation do they normally lend?

2. Does it matter if the property is HDB or private?

3. Does it matter if the property was paid up using CPF or cash?

Thanks.

Hi kahhean,
I'm speaking based on 15 years of bank lending experience.

1. banks can lend up to 80% of the current market valuation, subject to your income/liability qualify for loan.

2. if your fully paid-up property is HDB flat, the answer is HDB rules do not allow banks to lend you any money at all. only private properties can get Equity Loan.

3. yes, banks would have to deduct CPF used (including accrued interest of 2.5%) from the amount they are able to lend to you. eg. 80% of $500,000 is $400,000. If CPF utilised is $300,000, then bank can only lend you S$400,000 less S$300,000 or S$100,000 instead of S$400,0000.

If you only used cash to pay for this property, then amount of loan that can be granted is up to S$400,000 instead.

[Dennis Ng]

Hi Dennis

Has there been any changes to the HDB rules last few years on whether Banks can grant loans again on fully-paid HDB flats? Cos sad to say i've already fully paid mine using CPF....

Thanks!
MoonBB

Hi MoonBB,
HDB flats fully paid up cannot get any loans, in the past cannot, now also cannot.

Only private properties can one apply for Equity loan.

Cheers1

Dennis Ng

[ngtfook]

Hi Dennis,
Wrong post. Pls help to delete.
Thanks.

[Dennis Ng]

I think the Global Financial Crisis is hitting us really soon....time to raise Cash level. My cash level is now about 49% and planning to raise my Cash level further.

Anyone who want to take Equity Loan better apply now before Banks tighten lending criteria in a Crisis.

I always tell people that Loans are like insurance, you need to get it when you don't need it. If you need it and you don't have it, you cannot get it.

Trust my words, I worked 7 years in Corporate Lending from 1993 to year 2000, I know what I'm talking about. NO other seminar Speakers who conduct seminars on Property have the benefit of the Corporate Lending experience I had.

If you want unbiased analysis of Housing Loans, you can always call www.HousingLoanSG.com Hotline 6737 8801, from 9 am to 6 pm daily, from Monday to Friday. Your call will always be answered by a human being, this is our committment to our valued clients. You can also email us at info@HousingLoanSG.com providing your name and contact number so that my staff can contact you for a no-obligation discussion.

[Dennis Ng]

Hi Dennis,

Why people want to get equity loan?

Hi smarthsf

I think by taking "Equity" loan he may be referring against Property or Shares, basically in simple term is to raise Cash (Opportunity Fund) to leverage before the bank tighten

To buy more later, hopefully cheaper when there is blood in the street (when everyone gave up)!

yes, equity loan on property is to extract Cash (Equity) from one's property, conditions apply:

1. only Private properties possible, HDB flats, even if fully paid, cannot get Equity loan.

2. The current Market Value of the Property must be higher than the current loan outstanding.

eg. Market Value of Property S$1,500,000
Loan outstanding is S$500,000.

Can increase loan to max 70% to 80% of Market Value (I suggest 70% to be prudent) or = S$1,050,000.

So in this case, additional loan of S$550,000 can be obtained (of course one's income and existing loan obligations would be considered before loan approved).

If any CPF used, eg. CPF used is S$300,000, then CPF used will be deducted and reduce the amount of Equity loan available:

Equity Loan available S$550,000
Less CPF used S$300,000
Equity Loan Granted: S$250,000.

Hope this clarifies.

The interest rate on Equity Loan is same as Housing Loan and is currently about 1% only. Even if interest rates on Housing Loans go up to say, 4%, paying 2 years of interest (downside) is only 8%. However, any investment made in Crisis, typically returns can be easily 50% to 100%.

As I often mentioned, the average wants to pay off their debts. The Rich Borrow to Become Richer.

I currently have about S$1.5 million Cash and my total outstanding loans on 2 properties is S$970,000.

[Starfire]

Hi Dennis,

Why people want to get equity loan?

Hi smarthsf

I think by taking "Equity" loan he may be referring against Property or Shares, basically in simple term is to raise Cash (Opportunity Fund) to leverage before the bank tighten

To buy more later, hopefully cheaper when there is blood in the street (when everyone gave up)!

yes, equity loan on property is to extract Cash (Equity) from one's property, conditions apply:

1. only Private properties possible, HDB flats, even if fully paid, cannot get Equity loan.

2. The current Market Value of the Property must be higher than the current loan outstanding.

eg. Market Value of Property S$1,500,000
Loan outstanding is S$500,000.

Can increase loan to max 70% to 80% of Market Value (I suggest 70% to be prudent) or = S$1,050,000.

So in this case, additional loan of S$550,000 can be obtained (of course one's income and existing loan obligations would be considered before loan approved).

If any CPF used, eg. CPF used is S$300,000, then CPF used will be deducted and reduce the amount of Equity loan available:

Equity Loan available S$550,000
Less CPF used S$300,000
Equity Loan Granted: S$250,000.

Hope this clarifies.

The interest rate on Equity Loan is same as Housing Loan and is currently about 1% only. Even if interest rates on Housing Loans go up to say, 4%, paying 2 years of interest (downside) is only 8%. However, any investment made in Crisis, typically returns can be easily 50% to 100%.

As I often mentioned, the average wants to pay off their debts. The Rich Borrow to Become Richer.

I currently have about S$1.5 million Cash and my total outstanding loans on 2 properties is S$970,000.

Hi Dennis,
Questions :

(1) Less CPF used applies to both husband and wife ?
(2) What happen if i want to take up the loan myself ? Can they less off only my CPF alone ?

[Dennis Ng]

Hi Dennis,
Questions :

(1) Less CPF used applies to both husband and wife ?
(2) What happen if i want to take up the loan myself ? Can they less off only my CPF alone ?

Hi Starfire,
any CPF used for that particular property need to be deducted, whether your wife is borrower does NOT change anything, as long as she used CPF, the CPF used will be deducted from max loan available.

The reason is in terms of ranking for payment, when a property is paid, the ranking order is:
1. Housing Loan
2. CPF used to be refunded to CPF account
3. Payment of Equity Loan and/or interest.

So Equity Loan ranks after CPF in payment, which is why banks need to deduct CPF used before deciding amount of equity loan available.

In this case, some banks can use max 80% of current Market valuation to calculate loan available instead of 70%.

You can email to info@HousingLoanSG.com providing your name and mobile phone number and one of my staff will call to assist. My staff are all trained and experienced to assist, I no longer provide the service personally. Anything not sure, they will check with me for answer, so you can be assured of whatever information provided by them.

[Moonwalker]

Hi Dennis, question:

Quote
"1. only Private properties possible, HDB flats, even if fully paid, cannot get Equity loan."

Question
What about ECs that have reached their 5 years MOP. Possible to get equity loan?

If not possible, how about when they reach 10 years?

[Dennis Ng]

Hi Dennis, question:

Quote
"1. only Private properties possible, HDB flats, even if fully paid, cannot get Equity loan."

Question
What about ECs that have reached their 5 years MOP. Possible to get equity loan?

If not possible, how about when they reach 10 years?

EC can only take Equity Loan after 5 years MOP. You can email your name and contact number to info@HousingLoanSG.com and one of my staff will assist you. You can also call www.HousingLoanSG.com at 6737 8801 Mon to Fri 9 am to 6 pm.

[thomaslee]

Hi, pls give me some opinion.

My current EC (more than 10 years) outstanding loan to bank is about S$100k
I plan to buy 2nd property at the budget of S$1M. I cannot afford to come out S$400k in cash to met 40% rule. My limit is only S$200k
My intenetion are to rent out the 2 properties.

I have 3 opinion:
Option 1
-I use cpf to clear the S$100k loan (if my wife & i have total S$200k in Original account, can we do so? do we need to keep a min sum in cpf?)
- I get 80% loan from bank and paid 20% in cash.

My thinking,
I can use the rental collect from 1st property to pay for the 2nd property monthly loan. Even the properties cannot rent out for a period, i still can afford to pay the monthly loan for the 2nd property.


Option 2
- I get equity loan of S$200k from current EC,
- I paid 20% in cash to met 40% rule
- I get 60% loan from bank

Option 3
- I get equity loan of S$100k from current EC
- I paid $200k(20%) in cash
- I paid $100k(10%) in cpf
- I get 60% loan from bank

My thinking,
I have to pay the monthly loan for both properties. Although i can use the rental fee to cover but i have to prepare what if the properties cannot rent out during economic bad-time.

Which option will be more advantage to me?

[Dennis Ng]

Hi, pls give me some opinion.

My current EC (more than 10 years) outstanding loan to bank is about S$100k
I plan to buy 2nd property at the budget of S$1M. I cannot afford to come out S$400k in cash to met 40% rule. My limit is only S$200k
My intenetion are to rent out the 2 properties.

I have 3 opinion:
Option 1
-I use cpf to clear the S$100k loan (if my wife & i have total S$200k in Original account, can we do so? do we need to keep a min sum in cpf?)
- I get 80% loan from bank and paid 20% in cash.

My thinking,
I can use the rental collect from 1st property to pay for the 2nd property monthly loan. Even the properties cannot rent out for a period, i still can afford to pay the monthly loan for the 2nd property.


Option 2
- I get equity loan of S$200k from current EC,
- I paid 20% in cash to met 40% rule
- I get 60% loan from bank

Option 3
- I get equity loan of S$100k from current EC
- I paid $200k(20%) in cash
- I paid $100k(10%) in cpf
- I get 60% loan from bank

My thinking,
I have to pay the monthly loan for both properties. Although i can use the rental fee to cover but i have to prepare what if the properties cannot rent out during economic bad-time.

Which option will be more advantage to me?

I personally won't be thinking of buying any condo right now. The next Global Financial Crisis is hitting us and may have already started without most people noticing.

Please note that Singapore economy is already in negative growth...in 6 to 12 months' time, when companies start cutting pay and retrenching people, the last thing on anyone's mind is to buy property.

[Dennis Ng]

Dont blink, Financial Armageddon Is almost here...2011

http://www.youtube.com/watch?v=ureyMyhsTdE

As I have mentioned many times, the next Global Financial Crisis would be worse than the last one in year 2008...it'll be more prolonged and steep...and actually, the NEXT Global Financial Crisis might have already started...just that things are still NOT too bad now that few would notice its arrival...

But warning signals that all is NOT well include major countries reporting slower economic growth, stock markets falling by close to 20%, Gold prices going up by US$400 in 2 months to US$1,900 (now correcting back to possibly US$1,700)...

What assets would do well in a Stagflation?

Real Assets...including Gold/Silver/Oil..anything Real...becos the Value of each dollar goes down, so the prices of Real Assets go up. This is taught in my Stock Seminar, please refer to the seminar notes. My Seminars are the ONLY ones that teach people what to do in the Next Global Financial Crisis.

So how will property as a real asset fair if the economy is in such depressed state ?

depends, if inflation is higher than weak economic growth, property prices might hold steady or even rise. This is why I own 1 investment property currently (just 12% of my wealth though). I own 7% silver and 2% in Gold. I also have 7% invested into UK Endowment which provides 90% Capital Guarantee even in the worst case scenario of the collapse of UK Insurers in a Crisis. I currently also have 52% in Cash (standby to bargain hunt after stock prices Crash) and 13% in Stocks as well.

Real Investors always factor in possibility that we may be wrong, and we plan our Investment Portfolio accordingly. My investment portfolio is planned in such a way that it is ALL Weather Proof, that I'll be financially ok whether it's inflation, stagflation, recession or depression.

Is your Investment Portfolio ALL Weather Proof? If you want to find out more about UK Endowment, you can email to info@tradedendowment.com or call us at 6883 2235.

Cheers!

Dennis Ng

9 Aug 2011

the next Global Financial Crisis is likely to be worse and more severe than the previous one in year 2008, why?

1. in last round of Crisis, governments throughout the world came to the rescue by borrowing money and printed money. The problem is right now many countries have already borrowed quite a lot of money and there is limited room to borrow much more money to "rescue" the world in the next Crisis.

2. in last round of Crisis, governments throughout the world lowered interest rates to stimulate their respective economies. The problem in the next Crisis is that we'll have the Problem of Inflation...high inflation makes it difficult for countries to lower interest rates, as low interest rates will worsen inflation rates...U.S. current inflation rate is 3.6%, higher than its average about 2% in the last 20 years...China's inflation rate is already 6.5%, and Singapore inflation rate is 5.2%, it is possible for U.S. inflation rate to go up to 5%...and when that happens, it is likely for the 10 year US government bond yield to spike up from current LOWEST level in history, yield of about 2.4% (or HIGHEST Bond Prices in history), to abotu 5%, and that might mean U.S. government bonds falling by over 50%!!! (a Bond Market Crash which didn't occur in the last Crisis.

3. Rising inflation and rising unemployment and austerity measures (ie. cut in social benefits) will lead to many, many more countries having Social Unrest, many more governments throughout the world are likely to be overthrown...

4. when money stops to flow on the streets, blood will flow on the streets...this is scary...

5. and throughout history, if we observe, when there are prolonged period of economic weakness, it typically will trigger and followed by a War. The early 1900s recession was ended by the World War 1....the Global Depression which started in 1929...was finally ended with the beginning of World War 2 in 1938...so if history is any guide, we may see the tigger of a World War 3 should the next Global Financial Crisis resulted in prolonged economic slump...the next economic slump is likely to be longer and more severe due to reasons 1 to 4 as stated above...

I really do NOT wish such events will happen, but this is my latest view on what might happen in the next few years...I really hope I'm wrong, but I think what I analysed seems quite logical...

12 Aug 2011
people will lose confidence in many currencies around the world in the next Crisis.

The 5 fundamentally strongest currency in the world are: China Renminbi, Switzerland Swiss Franc, Canadian Dollars, Australian Dollars and Singapore Dollars.

(Canada and Australia are commodity backed currency) while other 3 countries are backed by foreign reserves.

Good news is Hot money might flow to Singapore in the next Crisis becos of our safe haven status.

[Jasper]

Hi Dennis Sifu,
the bank valuation is crazy ....

I have June to help me on Equity Loan.
Here are the valuation from banks
Bank A) 2m
Bank B & C ) 2.3m
Bank D) 2.4m
Bank E) 2.85m (Wow )

I plan to take up Bank B or C -> 2.3m, at 80% valuation.
As I cannot believe Bank E valuation, and I do not need that much.

Family do not own car, so current installment is only 31% of my family income exclude my passive income $$ from HDB.
(If include is only 18%).

I would say I am safe to take up the equity loan.

Please correct me if I am wrong.

Thanks
Regards
Jasper

[Dennis Ng]

Hi Dennis Sifu,
the bank valuation is crazy ....

I have June to help me on Equity Loan.
Here are the valuation from banks
Bank A) 2m
Bank B & C ) 2.3m
Bank D) 2.4m
Bank E) 2.85m (Wow )

I plan to take up Bank B or C -> 2.3m, at 80% valuation.
As I cannot believe Bank E valuation, and I do not need that much.

Family do not own car, so current installment is only 31% of my family income exclude my passive income $$ from HDB.
(If include is only 18%).

I would say I am safe to take up the equity loan.

Please correct me if I am wrong.

Thanks
Regards
Jasper

The answer is yes. If you want to be really safe, cap loan to 70% of valuation instead.