For many Singaporeans, property is their largest asset. Beyond living in it, property can also be used as a financial tool to unlock liquidity through an Equity Term Loan (ETL), sometimes referred to as a “cash-out refinancing.”

In essence, an ETL allows homeowners to borrow against the equity of their property, using the property as collateral while receiving funds for other purposes. This can be a cost-efficient financing option compared to personal loans, SME loans, or car loans, which often come with higher interest rates.

In this guide, we explain the benefits of ETLs, how they are calculated, and the most common uses among Singaporeans, with practical examples.

Benefits of an ETL

1. Lower Interest Rates Compared to Other Loans
   
   
   • ETLs are secured against property, so interest rates are typically lower than unsecured loans like personal or SME loans.
     
   • Mortgage-linked interest rates are usually 1%–2% lower than standard SME financing.
     
     
2. Flexible Usage of Funds
   
   
   • Unlike traditional housing loans, ETLs can be used for a variety of purposes, such as business, investments, education, or even lifestyle purchases.
     
     
3. Large Loan Quantum
   
   
   • Depending on the current market valuation (CMV) of the property, owners can unlock hundreds of thousands to millions in liquidity.
     
     
4. Amortisation Advantage
   
   
   • ETLs follow a home-loan amortisation structure, meaning the interest portion reduces over time, unlike flat-rate car loans which front-load interest costs.
     
     

Common Uses of ETL Among Singaporeans

1. For Business Purposes

• SME loans often carry interest rates that are 1-2% higher than residential mortgage home loan rates, while home loan/ETL rates are typically around 1% to 3% p.a.
  
• Using an ETL allows business owners to fund operations at lower borrowing costs.
  
  

Example:

• SME Loan $500,000 @ 5% = $25,000 annual interest.
  
• ETL Loan $500,000 @ 2% = $10,000 annual interest.
  
• Savings = $15,000 per year.
  
  

2. Buying Big-Ticket Items (e.g., Car)

Car loans in Singapore use simple interest (flat rate), not amortisation. This means interest costs do not reduce even as you repay the loan.

• Car Loan Example: $150,000 car loan @ 2.8% simple interest over 7 years.
  
  • Interest = $150,000 × 2.8% × 7 = $29,400 total interest.
    
  • Effective rate ≈ 5% p.a. (higher than it looks).
    
• ETL Example: $150,000 ETL @ 3.5% amortised over 7 years.
  
  • Monthly repayment ≈ $1,990.
    
  • Total interest paid ≈ $16,300 (almost half of car loan interest).
    
    

Using ETL for a car purchase can save tens of thousands in interest.

3. Overseas Studies for Children

Higher education abroad can cost $200,000–$400,000, depending on the country and course.

• Instead of taking education loans at ~5%–6% interest, parents can cash out equity at ~2% – 2.5% with ETL.
  
• This results in substantial savings over a multi-year education plan.
  
  

4. Paying Off Overseas Property Loan

• Overseas property loans typically carry higher rates (e.g., 6%–8%) due to country risk.
  
• Some Singaporeans cash out via ETL locally at the current home loan interest rate of ~2% – 2.5% to fully or partially repay their overseas loan, reducing long-term financing cost.
  
  

5. Investment or Insurance Purposes

A growing use case is legacy planning and insurance funding.

Example:

• A 65-year-old client takes a $200,000 ETL with a 10-year tenure.
  
• Repays approx. $2,000/month (principal + interest).
  
• Uses proceeds to buy a life insurance plan that pays $1 million upon death.
  
• This leverages property equity into a significant legacy benefit for heirs.
  
  

*Not a financial advise, we can link you up with a professional who can advise you further

How is ETL Calculated?

Step 1: Determine Potential Loan Quantum

Formula:

Potential ETL = 75% of CMV – CPF used – Outstanding loan

*In this case, it is better to push the CMV as high as possible

Step 2: Check TDSR (Total Debt Servicing Ratio)

• If the property still has an existing mortgage, the borrower must pass TDSR (55%), which limits total monthly debt obligations to 55% of gross monthly income.
  
• If fully paid, TDSR still applies when cashing out, but the absence of an outstanding mortgage makes qualification easier.
  
  

*For a property that is fully paid without loan + Client is unemployed, we are able to assist on 50% CMV loan for you. 

Example of ETL Calculation

• Property CMV: $2,000,000
  
• Outstanding loan: $500,000
  
• CPF used (with accrued interest): $300,000
  
  

Potential ETL = (75% × $2,000,000) – $500,000 – $300,000
= $700,000

Client must still pass 55% TDSR, but in principle could unlock $700k in cash from the property.

Risks and Considerations

• Increased Debt Burden: ETL adds a new loan, impacting monthly obligations.
  
• TDSR Limitation: Borrowing power is capped at 55% of gross monthly income.
  
• Market Valuation: A property’s value may fluctuate; higher valuations unlock more, lower valuations limit ETL.
  
• Opportunity Cost: Cashing out for consumption (e.g., cars) may reduce future investment potential.
  
  

Conclusion

An Equity Term Loan (ETL) is a powerful tool for Singaporeans to unlock liquidity from their property at relatively low interest rates compared to other forms of borrowing. Whether it’s to fund a business, buy a big-ticket item, support children’s overseas education, refinance overseas property, or invest in legacy planning, ETLs provide flexibility and financial leverage.

However, borrowers must carefully consider long-term affordability, TDSR compliance, and the purpose of cashing out. Used wisely, ETLs can transform idle property wealth into meaningful financial opportunities, balancing today’s needs with tomorrow’s legacy.

Do speak with our team of advisors on ETL today. 

FAQS

1. What is the maximum amount I can borrow under an Equity Term Loan (ETL)?

The maximum loan depends on your property’s Current Market Valuation (CMV). In general:

• Up to 75% of CMV, minus outstanding housing loan and CPF used with accrued interest.
  
• For unemployed: If the property is fully paid and unencumbered, cash-out is capped at 50% of CMV.
  
  

2. Can HDB do ETL?

ETL cash-out refinancing is only applicable for private properties (condominiums, landed homes). HDB flats are not eligible for ETL under current MAS regulations.

3. How is an ETL different from a personal loan or SME loan?

• ETL: Secured against property, interest rates are typically 2%–2.5%, and repayment follows an amortisation schedule (interest portion reduces over time).
  
• Personal/SME loans: Unsecured, rates are higher (5%–8%), and often use flat-rate interest, where total interest cost is higher.
  This makes ETLs more cost-effective for large borrowings.
  
  

4. Can I use an ETL for investment or insurance purposes?

Yes. Many Singaporeans use ETLs for legacy planning or investment-linked insurance plans. For example, a retiree may cash out $200,000 via ETL to fund a life policy that pays $1 million upon death. However, such strategies should be carefully evaluated with financial advice, as ETLs increase debt obligations.