Paul Ho
Hong Leong Finance launches term loan for those who has fully paid up properties. The recent article on straits times seem to indicate that people without incomes and retired can easily be approved for such loans. There will be the usual loan scrutiny and credit assessment to be conducted before a loan is disbursed. At the time of publishing this article, Hong Leong Finance is busy getting ready to cope with many enquiries that will come their way.
Paul Ho (iCompareLoan.com) – 23rd March 2017
With the recent waiver on TDSR for those with properties with outstanding loans of below 50% loan-to-value, this means that MAS no longer enforce the TDSR requirement on the bank’s borrowers.
The banks are free to decide the lending criteria for such term loans.
Image: Cash Out, iCompareLoan.com
Retirees – Do not be too happy yet – Hong Leong Finance is not giving out loans Freely
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Is Hong Leong Finance freely giving out Equity-term-loans on fully paid out properties?
If a fully paid up property is worth $1,000,000, will a retiree who is 67 years old be able to borrow against this property with no income and live off this sum for the rest of their retirement?
The answer is probably NO. Hong Leong Finance, along with all other banks will review, the “Ability to repay” the loan. No finance company or banks will want to repossess your property in case you cannot repay or service the loan. Hence it is definitely not for retirees to “Cash out” using Equity-term-loan if they have no income and live on this sum of money as they will still need to service the loan.
Can you use this CASH OUT Equity-term-loan to retire on?
If a Retiree is 67, without a guarantor or without proof of income or ability to repay the loan, this loan will likely not be approved. Even if such a loan is finally approved, it will be limited to age 75. Surely you can use the money for several years, but if you have to repay the loan at age 75, you will still end up with no money as life expectancy of Singapore citizens are around 80 years old.
Guarantors with good income will need to come in to guarantee the loan in order to extend the loan tenure. The guarantors will need to earn good incomes and ultimately the guarantor’s TDSR will be affected.
CPF used with Accrued Interest – limits your Loan quantum
If you have a property that is fully paid with $1,000,000 valuation. If CPF used with Accrued Interest is $400,000.
Based on the current borrowing criteria, you can only borrow up to: –
50% of $1,000,000 = $500,000
Less CPF used with Accrued Interest = $400,000
Actual Cash out Equity-term-loan = $100,000
And these loans are only meant to target people with a lot of assets and need short term cash flow, but using this as retirement will be challenging as banks and financial institutions will not and cannot lend indiscriminately.
If you are unsure, please check with a Mortgage broker.
