Explainers
Published Date: 05 July 2018

Mortgage Equity Withdrawal Loan Rules

When refinancing a mortgage equity withdrawal loan (MWL), financial institutions (FIs) need to meet the rules for loan-to-value limits, tenure cap and total debt servicing ratio.

Loan Tenure Cap

The loan tenure for mortgage equity withdrawal loans (MWLs) is capped at 35 years.

Loan-To-Value Limits

For an individual or a shell company, the MWL, together with amount outstanding of any loan secured on same residential property and CPF monies used, have the following LTV limits:

Outstanding housing loans for other residential properties LTV limit
None 80%
1 or more 60%

Note: These limits do not apply to non-individual borrowers, excluding shell companies.

Borrower-Mortgagor and Guarantor-Borrower Requirements

The borrower-mortgagor requirement does not apply to MWLs.

The guarantor-borrower requirement applies to any new MWL application on or after 29 June 2013.
They also apply to the refinancing of any MWL in either of these cases:

  • There is no change in the borrower, mortgagor, guarantor or any other party (excluding financing FI) and where the application date of the existing MWL was on or after 29 June 2013.
  • There is a change in the borrower, mortgagor, guarantor or any other party (excluding financing FI) and where the application date of the refinancing is on or after 29 June 2013.

Rules apply even when the parties involved are different from those on the existing MWL.

Total Debt Servicing Ratio

MWLs are considered investment property loans, even when secured on an owner-occupied residential property. The 60% total debt servicing ratio threshold applies unless:

  • The borrower commits to a debt reduction plan with the financial institution (FI). They should repay at least 3% of the outstanding balance over a period of 3 years or less, and fulfil the FI's credit assessment criteria.
  • The amount of the refinanced MWL, together with any other outstanding loans secured on that residential property, do not exceed 50% of the property's current market valuation.