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If you are trying to buy a home and full payment is not on your card, there are limited options to finance your home. You have to either get a loan from a private bank or HDB loan. However, there are other alternatives to finance your home, which are not known to many people.  If you are looking for finance option for your home, you need to check these options. Even though these home financing options are not within the reach of all people, those who can have access to these options will have a better deal than an average individual.

 

Equity home loan

Do you own a private property that is fully paid? In that case, equity home loan is better option compared to a conventional mortgage for your another property. People who want to help their kids buy their first home may consider using equity home loan.
Equity home loan is a home loan that is granted to the burrower against his fully paid property.  Equity home loan is sometimes called second mortgage as the loan is granted against the first property.

According to the recently passed a new regulation, if the borrowers leverage maximum 50 percent of the value of a paid up home, they can ignore conventional loan curbs. Let us illustrate this:

You have a home which has been fully paid (there is no installment to be cleared, no bank loan). Let say market value of your home is $4. You are considering buying a condo. If you apply for home equity loan, you could get upto 50 percent of the value of your home. For example, your $4 million fully paid home will get you $2 million as home equity loan.

In order to get equity home loan, you have to use your fully paid property as the collateral. Interest rate for home equity loan is lesser than a regular home loan (mortgage). Usually, interest rate for home equity loan is about 1 percent per year and conventional home loan is about 2 percent per year. Interest rate for HDB loan is little higher, which is around 2.6 percent per year.

There is a drawback of this equity home loan. Since you are using your fully paid property as the collateral, you are risking your property in case you are unable to pay back loan. If you don’t pay back the loan, bank will foreclose on your fully paid property.

 

Lombard lending 

If you have something of high value in bulk quantity, for instance, gold, diamond, wine cellar etc. you can apply for a Lombard credit.

Lombard credit is the loan that you get through private banks against your high value asset. The usual interest rate for Lombard credit is between 2 and 3 percent per year. You get up to 80 percent value of your asset. For instance, you have gold that is valued at $1 million, you can get up to $800,000 loan.

Interest rate for Lombard credit is of course higher than home loan or mortgages, however, good thing about this financing option is you can monetize your asset and get benefits from your asset which otherwise is lying unattended. Lombard credit is available against high value assets such as art collection, old coin collection, classic car collections, classic watch collections etc.

Another good thing about Lombard credit is there is no serious risk involved. For example, if you lose your art collection to Lombard credit, you can easily go without your art collection. This is better than losing a home in home equity loan.

There are also drawbacks as well. Values of assets are volatile, therefore, if the value of your art collection falls, you will have to cover the margin call. If you are looking for Lombard credit you must take a precautionary step. You will have to approach different banks as the evaluation of your asset will differ from bank to bank.

 

Lending backed with securities

This financing option is more or less similar to Lombard credit. The only difference is Lombard credit works with any high value asset, where as securities backed lending is available on conventional assets, shares for instance.  The downside of this financing option is if your share value downfalls, you have to cover margin calls. You will have to pay more than 10 per cent as margin calls.

You will not have access to your shares during the loan period. For example, you cannot buy, sell or transfer shares that you have used as security bond. You get full control on your shares after you clear the loan.

When you are burrowing against your stock, the bank will evaluate your stock before loan is approved.  Stocks can be very volatile, therefore, sometimes bank will not approve loan against emerging market stock with high risk.

The three options explained above can be a great help for people who do not have an option to secure a mortgage. These three financing alternatives will come handy.

Whether you want home equity loan, Lombard credit or security backed lending, you can ask your family members to help you by using one of these financing alternatives. If you involved your family members on one of these financing options, you must be aware that you are putting your family at risk. Therefore act wisely.

One best property to loan  is SkySuites@Anson. The most recent launch property development, The SkySuites@Anson. It is on a 99 years leasehold and will rise in 8 Enggor Street, District 02 Singapore. It is proud to offer its 360 adorable condo units, with 1 to 3 bedrooms and penthouse units plus an arrays of shopping malls around. This property is develop under Arcadia Development.  A great place for family to build memories and success.