Hi John, thanks for the question!
Due to regulations and cooling measures implemented by the Government since 2012, banks actually frown on this practice.
Legally, this is totally okay. However, bank guidelines do say if anyone declares that the equity loan is used to buy another property, they may choose to reject the loan.
So you may want to put the reason down on the equity loan application form as "for investment purposes", rather than say it is for purchasing another property specifically.
I personally believe it is a good idea. Equity loans are at the same interest rates as a home loan, meaning you can get anywhere from 1.05% - 1.5% today based on the loan size.
For your case specifically, John, I think applying for an equity loan is perfectly fine since you did mention that you have enough personal outlay, but choose to use this method to minimise it.
Just make sure your cash or CPF used for the 2nd property can get you higher returns compared to the equity loan.
In general, if you are leveraging on house A to buy house B, just make sure you can well afford the increased monthly installments.
You know the phrase "the rich get richer"? When I was a banker years ago stationed at a branch in an affluent area of Singapore, this was exactly what private home owners were doing.
Fortunately for them, home prices increased and increased and increased and increased.
But here is a disclaimer: do not leverage more than you can afford to pay, or afford to lose.
Property prices can also go down and you may be left holding the bag.
Good luck John and congratulations on your 2nd property =)
Hi John, thanks for the question!
Due to regulations and cooling measures implemented by the Government since 2012, banks actually frown on this practice.
Legally, this is totally okay. However, bank guidelines do say if anyone declares that the equity loan is used to buy another property, they may choose to reject the loan.
So you may want to put the reason down on the equity loan application form as "for investment purposes", rather than say it is for purchasing another property specifically.
I personally believe it is a good idea. Equity loans are at the same interest rates as a home loan, meaning you can get anywhere from 1.05% - 1.5% today based on the loan size.
For your case specifically, John, I think applying for an equity loan is perfectly fine since you did mention that you have enough personal outlay, but choose to use this method to minimise it.
Just make sure your cash or CPF used for the 2nd property can get you higher returns compared to the equity loan.
In general, if you are leveraging on house A to buy house B, just make sure you can well afford the increased monthly installments.
You know the phrase "the rich get richer"? When I was a banker years ago stationed at a branch in an affluent area of Singapore, this was exactly what private home owners were doing.
Fortunately for them, home prices increased and increased and increased and increased.
But here is a disclaimer: do not leverage more than you can afford to pay, or afford to lose.
Property prices can also go down and you may be left holding the bag.
Good luck John and congratulations on your 2nd property =)