Home Equity: 5 Ways To Turn Your Home Into Cash

From renting out a spare room to taking out a home equity loan, you have a number of options in your arsenal to monetise your biggest asset.

You may already know that your property is an asset in which you can tap into and raise a significant amount of cash, if needed. 

This is useful if you’re in a financially tight spot and can’t afford everyday household expenses. But hey, this doesn’t mean that cashing out is solely reserved for when you’re in dire straits. You may also consider monetising if you have loftier ambitions of starting a business or going on a long, expensive vacation. 

Cashing out could also serve more long-term financial goals. In Singapore, where our population is fast greying, one of our biggest concerns is making sure we have built up enough retirement funds in order to retire comfortably. 

Lucky for us, there are ways to pocket some cash passively without needing to sell off our homes and buy a more affordable one (although that’s one way to do it, don’t get us wrong).

If you’re intrigued, let’s explore the ways you can cash out below.

1. Rent out a spare room

The tried and true solution for people who wish to retain ownership of their home. Renting out a spare room to eligible tenants could generate some sweet passive income.

Of course, if you’re not living alone, you may need to check if the reality of living with another person (read: a stranger) is something that’s comfortable for everyone at home. For HDB homeowners, you’d need to ensure that you’re eligible to rent out, which you can do so through MyHDBPage. 

On top of that, your home must fulfill its Minimum Occupation Period (MOP) before you can explore room or home rental options.

2. Downsize

This applies to homeowners with larger homes and more space than they know what to do with. Downsizing your home, which entails selling it off and buying a smaller property, is a go-to step for soon-to-be retiring homeowners in order to boost their rental income. 

However, this might not be the best option for everybody as it’s a mammoth task to take on, what with finding a buyer while on the hunt for a new home, uprooting from what feels familiar, plus the hassle of moving to top things off. 

If you can’t bear to part with your beloved abode, you can consider applying for Lease Buyback Scheme (LBS), a government scheme explained in greater detail below.

3. Take out a home equity loan

Home equity loans are also known as cash out refinancing. Exclusively for private property owners, you can loan a huge sum of money by cashing out your home equity (A.K.A. the market value of your property) at a relatively low interest rate — with your property as collateral. The catch? The bank can foreclose on your home if you can’t keep up with repayments.

As compared to the rest, this is easily the fastest way to get your hands on cold hard cash. However, it is also the riskiest as you’re putting your home on the line. Do thread cautiously and ensure you’ve carefully budgeted your finances — and prepared a buffer — to pay off your loan in full.

Check out our home equity loan guide in detail.

4. Apply for Lease Buyback Scheme (LBS) 

Granted, the end goal of LBS is more towards growing your CPF Retirement Account (RA) and not so much about receiving an influx of cash per se. 

For the uninitiated, LBS is a government scheme that lets citizens aged 65 and above to sell back the tail end of their lease to HDB and receive an LBS bonus of $30,000 (for 3-room flat or smaller), $15,000 (for 4-room flat) or $7,500 (for 5-room flat or bigger). Note that there’s a limit to how much of your lease you can sell — this prevent folks from outliving their leases.

The length of lease to keep largely depends on the age of the youngest owner. For example, homeowners age 65 to 69 are required to retain at least 30 years of their lease. For people aged 80 and above, the minimum is lower at 15 years. 

The net proceeds will first go towards your CPF RA up to your Basic or Full Retirement Sum. Once this is met, only then can you pocket the remainder of the proceeds in cash, up to a limit of $100,000.

5. Sign up for Silver Housing Bonus (SHB) Scheme

There’s rightsizing and there’s rightsizing under the SHB, which gives you a cash bonus of up to $30,000 in addition to the sale proceeds. 

This is ideal for seniors who are willing to rightsize to a smaller home and don’t mind cutting into a huge chunk of their property’s sale proceeds. Once you receive the proceeds, you’re required to make a top up of $60,000 into your CPF RA and join CPF LIFE (which provides monthly payouts for life). 

But if the proceeds amount to less than $60,000, the cash bonus will be pro-rated on a 1:2 ratio instead. In other words, for every $2 of your top-up amount, you will get $1 in cash bonus.

Read these next:
What Is A Home Equity Loan And How It Helps Tackle Debt
The When And How Of Refinancing Your Home Loan
How Much Can You Borrow For Your Home Loan?
Fixed vs Floating Home Loan Rates: Which One Is Suitable For You?
Best Home Loans In Singapore 2020