Came across this article on Yahoo Finance recently & got concerned on a couple of points brought up.
Many of the reasons brought up in the article are generally sound and rationale. However, there were a couple that were not accurate, at least at the point of publishing.
For the avoidance of any doubts, as the header of the article pointed out, this article refers to HDB flats & not private properties.
This is the first point to take note.
As mentioned earlier, this article is clearly referring to HDB flats & not private properties.
For HDB flat owners, the option of home equity loan is NOT available.
And here's the next point to note:
What one needs to take note as a borrower is the Commitment Period, which is commonly referred to 'lock-in period' as well, stated in the Letter of Offer (LO). The Commitment Period refers to the time frame whereby you will be penalized if you were to do a partial or full redemption of the outstanding loan. The period of commitment period defers, and will be dependent on the terms & conditions stated in the Bank's LO. Typically speaking, lock-in period normally ranges from 1 to 3 years. Though there were packages in the past that came with a longer commitment period.
Once the commitment period of the loan is over, borrowers will be able to make partial or full redemption of the loan without incurring any penalty.
Jason Ow S. H.
Senior Financial Consultant