Equity Loan Singapore - Unlock Property Equity for Business or Investment

A property equity loan in Singapore allows a property owner to borrow against the equity built up in their property - the difference between current market value and outstanding mortgage balance. The property serves as collateral. There are two common structures: a term loan (full amount disbursed upfront, repaid over a fixed tenure) or an overdraft or revolving facility (funds drawn and repaid flexibly up to a limit). Banks typically finance up to 75-80% of current property value less any outstanding mortgage for residential properties, subject to TDSR.

Yes, and this is a common approach for business owners who have accumulated property equity in Singapore but face difficulty accessing unsecured business credit. By taking an equity term loan or overdraft secured against residential or commercial property, business owners can access working capital at interest rates generally lower than unsecured SME loans. However, if the business runs into difficulty and the loan cannot be serviced, the property used as collateral is at risk. TDSR rules still apply to individual borrowers, constraining the available equity and loan quantum.

The amount depends on the current market valuation, the outstanding mortgage balance, and the bank's LTV policy. The general formula is: (current valuation × applicable LTV cap) − outstanding loan balance = available equity facility. For example, if your property is valued at S$2 million, your outstanding mortgage is S$800,000, and the bank lends up to 75% of value, the maximum equity facility is approximately S$700,000. TDSR still applies - your monthly repayment on the equity loan must fit within your 55% TDSR threshold. CPF usage rules also interact with equity loan calculations.

Yes. If you used CPF Ordinary Account savings to purchase your Singapore property, the CPF usage plus accrued interest at 2.5% per annum creates a notional liability that must be refunded to CPF when the property is sold. This does not stop you from taking an equity loan, but the equity you perceive as available (based on valuation minus mortgage) may be overstated once the CPF refund obligation is factored in. This is a frequently misunderstood aspect of property equity planning in Singapore.

Property-backed loans generally offer lower interest rates, higher loan amounts, and longer tenures - but they put your property at risk if the business hits difficulty. Unsecured SME loans carry no collateral risk but come with higher interest rates, lower quantum limits, and stricter cashflow requirements. Some business owners use both: an unsecured facility for short-term working capital, and a property-backed line for larger, longer-term financing where the rate differential makes the property risk worthwhile.