Refinancing and Gearing-up

Refinancing and Gearing-up
Usually when my clients refinance, some of them will ask me about the possibility of getting extra cash out from the property. There are a few ground rules that dictate whether this is possible.

Property Type

Only private properties can do a cash-out. HDB flats cannot be leveraged for additional loan from the banks at all.


The valuation of the property plays a huge part on how much you can get from the banks. A general rule of thumb is banks will base the calculations on 70% to 80% of the current valuation of the property.

CPF Used

The amount of CPF used for the property in lump sum and monthly payments will be deducted from the calculations of the max loan available. This is to prevent people from cashing out their CPF, so to speak.


Assuming the above criteria are satisfied, we now go on to see how banks determine how much a client can cash out.

Let’s say we have a customer Mr Paul.

Paul has an outstanding loan amount of $500,000 with DBS, remaining tenor 25 yrs.

His property latest valuation is $2,000,000.

He used $100,000 CPF in total for the repayment of the said property.

His fixed income is $20,000 per month.

Total liabilities per month are $6000. [Car loans, Credit Cards etc.]


The maximum cash out amount he can take will be:

$1,600,000 [80% of 2,000,000] – $500,000 [DBS outstanding] – $100,000 [CPF used] = $1,000,000

But based upon TDSR calculations, his maximum loan size is $1,200,000 based upon his income and liabilities.

Therefore the final figure that Paul can cash out is based on $1,000,000 – [$500,000 DBS outstanding loan + $100,000 CPF used] = $400,000.

The above is a simple illustration on how cash out works in the current regulation climate.


Ok, so what do I do with the extra cash?

With the extra cash, you can go for a holiday or buy some expensive stuff’s to pamper yourself. But that would not be wise at all. Well there are a couple of common ways people use this extra cash.

Pay Off Debts

Some clients use this cash to immediately change a new car or pay off their loans or debts. The logic is very simple, your mortgage loan rate is fixed at roughly ~2% currently, your unsecured debts interest range from 12% to 28%. Another good benefit is you get to consolidate your debts into 1 loan, no more running to AXS machines 3 or 4 times a month. Wootz!

Purchase Blue Chip Stocks or Bonds

The more adventurous clients will turn to the stock market for more lucrative options.

I have client that purchase dividend yielding blue chip stocks like Singtel, Starhub and Singpost. Another valid option will be to purchase government or corporate bonds. These instruments generally yield at least a 4% return per annum, effectively outperforming the roughly ~2% mortgage interest rate you are paying.

There is also a selected clique of clients that really plans for the future. They take the lump sum cash to purchase a Universal Life insurance policy to start their legacy planning. Do drop us an email at if you need further information on Universal Life Policies.


How do we start?

You need to be sure you are out of lock-in with your current bank and there are no more subsidy claw-backs to make refinancing and cashing out a financially astute decision. You can email me personally at or drop us a call at 68161046 for some free friendly advice!!! =)

Written by Jason Lam

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