get an agent

Buy with an Agent

Dedicated experts at your service

Documentation Services

Leave the paperwork to us

do it yourself

Browse New Launch Condos

Find new units for sale

Prefer to do-it-yourself?

Check out how our platform can help

Browse Resale Listings

Connect with sellers through our app

RESOURCES

Calculate Buyer’s Stamp Duty

Find the amount payable when buying

Affordability Calculator

Find the amount payable when buying

How to Buy an HDB

A step-by-step guide to buying HDB

How to Buy a Private Property

A step-by-step guide to buying condo/landed

get an agent

Sell with an Agent

Dedicated experts at your service

Documentation Services

Leave the paperwork to us

do it yourself

Prefer to do-it-yourself?

Check out how our platform can help

Post a Listing for Free

Connect with buyers through our app

RESOURCES

Calculate Seller’s Stamp Duty

Find the amount payable when selling

How to Sell my HDB

A step-by-step guide to selling HDB

How to Sell my Private Property

A step-by-step guide to selling condo/landed

HOME E-VALUATION

For tenants

Rent with an Agent

Dedicated experts at your service

RESOURCES

How to Rent an HDB

A step-by-step guide to renting HDB

How to Rent a Private Property

A step-by-step guide to selling condo/landed

For landlords

Lease with an Agent

Dedicated experts at your service

Lease Documentation

Leave the paperwork to us

RESOURCES

How to Lease an HDB

A step-by-step guide to renting HDB

How to Lease a Private Property

A step-by-step guide to selling condo/landed

Do it yourself

Prefer to do-it-yourself?

Check out how our platform can help

ARTICLE CATEGORIES

HDB

All things about public housing

Private Property

All things about private property

Home Improvement

Guides for must-know reno tips

Financing

All about mortgage solutions

Towns

Singapore townships in focus

Client Stories

Success stories from customers

Founders’ Message

From the desks of Rhonda & Race Wong

Share on facebook
Share on twitter
Share on email
Share on whatsapp
Young couple comparing rates between a hdb loan and bank loan

Guide to HDB Loan Versus Bank Loan: 5 Crucial Factors to Help You Decide!

Ohmyhome

Ohmyhome

Share on facebook
Share on email
Share on whatsapp

HDB loan or bank loan? If you’re planning on buying a home, securing the right loan is one of the most important steps you’ll take. But how do you choose? What are the factors to consider?

We’ll work you through the pros and cons of getting either an HDB loan or a bank loan, so you can evaluate which is better for you.

But first, do you qualify for an HDB loan?

HDB loan eligibility criteria

Not everyone is eligible for an HDB Loan. To qualify for one, you must first satisfy the following conditions:

  • At least one buyer for the HDB is a Singapore citizen
  • Have not taken two or more housing loans from HDB previously
  • Average gross monthly household income is less than $14,000
  • Average gross monthly household income is less than $7,000 for singles buying 5-room or smaller resale flat or 2-room new flat in a non-mature estate
  • Must not own or have disposed of any private residential property in the past 30 months before the date of application for an HDB Loan Eligibility (HLE) letter

*For HLE and flat applications received before 11 September 2019, the income ceilings are $12,000 for families, $18,000 for extended families, and $6,000 for singles.

If you do not meet the conditions mentioned above, you can still opt for a bank loan. The eligibility for a bank loan is relatively simple; having a good credit score is good enough.

HDB loan or bank loan: Which one should you choose?

Getting an HDB loan or a bank loan has distinct differences. Below are some of the key differences you should take note of when deciding between the two:

HDB Loan Bank Loan
Interest Rate 2.6% (0.1% above the CPF Ordinary Account interest rate) About 1.3% – 2.4% (Dependent on the type of bank. Floating interest rates may also fluctuate)
Downpayment 10% in cash or CPF At least 5% in cash and 20% in cash or via your CPF OA
Maximum Loan New flats: 90% of the purchase price

Resale flats: 90% of the resale price or market valuation, whichever is lower

75% of the purchase price
Minimum Loan None ~S$100,000
Late Payment Penalty Currently 7.5% per annum Depends on banks, usually higher than HDB
Eligibility Income + Citizenship requirements No other requirements other than a decent credit score

Source: HDB Website

Pros and cons of getting an HDB Loan and a bank loan

should-you-get-hdb-loan-or-bank-loan-consider-these-5-crucial-factors

Pros of getting an HDB Loan over a bank loan

Generally, the HDB loan is a more popular financing option, especially for young couples and working adults. Here’s why:

1. No early repayment penalty for HDB loan

One of the key attractions of getting an HDB loan is its flexible repayment period. If you take on an HDB loan, you will not be penalised if you choose to repay your loan early.

On the other hand, bank loans will not allow you to pay off your loan early. You may even end up incurring an early repayment penalty if you do so.

Furthermore, should you choose to repay your HDB loan earlier, you will not be required to pay the remaining outstanding interest committed initially to the HDB. The interest you have to pay will be based on your remaining HDB loan balance.

2. Those taking an HDB loan can choose to switch to a bank loan

For those who are thinking of securing an HDB loan, you have the option to refinance and take up a bank loan instead. Since there is no lock-in period for HDB loans, borrowers can freely decide to switch to a bank loan at any time, without incurring a penalty.

However, if you opt for a bank loan, you cannot change to an HDB loan during the mortgage period. This means, when you secure an HDB loan, you can enjoy more flexibility when it comes to early repayments, and the option to switch to a bank loan.

3. HDB loan has a lower initial downpayment

Another reason why people choose an HDB loan over a bank loan is the lower initial downpayment. The downpayment for HDB loans is 10% of the purchase price, while banks’ downpayment is 25%.

For example, if you’re buying a $400,000 flat with an HDB loan, you will need to pay $40,000 in downpayment in cash or CPF OA savings.

But if you’re taking a bank loan, you may have to fork up $100,000 for the downpayment, of which $20,000 has to be paid in cash. Especially for couples who’ve just started their professional careers, the latter may seem relatively unaffordable.

Furthermore, HDB loans also include a Staggered Downpayment Scheme. This means that you can pay your downpayment in two parts: the first 5% will be paid during the signing agreement for lease, while the other 5% will be paid during the key collection. You can find out more in the table below:

Factors HDB Loan Bank Loan
Maximum loan granted 90% 75%
Downpayment (during signing of the agreement of lease) 15% (CPF OA or cash) 5% (Cash)

5% (CPF OA or Cash)

Downpayment (during keys collection) 5% (CPF OA or cash) 15% (CPF OA or cash)

Source: HDB Website

Pros of getting a bank loan over an HDB loan

should-you-get-hdb-loan-or-bank-loan-consider-these-5-crucial-factors

Of course, there are also drawbacks when it comes to getting an HDB loan. Here are some reasons why you should opt for a bank loan instead.

1. Lower interest rates

One of the most significant downsides to getting an HDB Loan would be the high interest rate. At an interest rate of 2.6%, you will potentially be paying more for your flat than intended. For example, if you have a $400,000 mortgage loan from HDB for over 25 years, you will be paying $1,815 monthly for your flat. Over 25 years, this amounts to $544,500, which means you will be paying about $144,500 in interest for your flat.

Conversely, if you decide to take a bank loan at an interest rate of 1.5%, you will be paying $1,800 a month for your flat. Over 25 years, you will be paying $540,000 for your flat. By choosing a bank loan over an HDB loan, you will be saving about $4,500 in interest over 25 years.

However, do note that most bank loans are pegged to a floating interest rate, so you may not be paying a constant interest rate throughout your loan tenure.


Dive Deeper: Manage your home-buying budget with Ohmyhome’s Financial Planning Calculator

2. Easier eligibility requirements

As mentioned above, you may have to go through multiple hoops to be eligible for an HDB loan. So for foreigners or couples earning a higher income, a bank loan may be your best bet as eligibility requirements are much more flexible.

Getting a mortgage loan in Singapore

With a clearer picture of what HDB and Bank Loans entail, you can now decide which financing option is best for your needs!

Consult with Singapore’s top mortgage advisors with Ohmyhome

We’ll give you a free, in-depth mortgage report, including your loan eligibility, cash or CPF downpayment required, information on upfront costs like stamp duty, legal fees, and the monthly installment amount. We’ll also guide you through an easy comparison of banks’ interest rate packages so you can best choose the right home loan to secure for your property.


This article was originally published on Planner Bee, your handy financial planning app! Learn more about managing your money, investments and insurance on Planner Bee’s blog.

Subscribe Now

Get a notification every time we upload a new blog post.

Featured Blogs

Highlighting unique property views for every Singaporean

get an agent

Buy with an Agent

Dedicated experts at your service

Documentation Services

Leave the paperwork to us

Do it yourself

Browse New Launch Condos

Find new units for sale

Prefer to do-it-yourself?

Check out how our platform can help

Browse Resale Properties

Download the app and speak directly to sellers

RESOURCES

Affordability Calculator

Calculate required tax for selling

Calculate Buyer’s Stamp Duty

Find the amount payable when buying

How to Buy an HDB

A step-by-step guide to buying HDB

How to Buy a Private Property

A step-by-step guide to buying condo/landed

bUY OVERSEAS

get an agent

Sell with an Agent

Dedicated experts at your service

Documentation Services

Leave the paperwork to us

do it yourself

Prefer to do-it-yourself?

Check out how our platform can help

Post a Listing for Free

Download the app and connect with buyers

RESOURCES

Free Home E-Valuation

Know the value of your property in seconds!

Calculate Seller’s Stamp Duty

Find the amount payable when selling

How to Sell an HDB

A step-by-step guide to selling HDB

How to Sell my Private Property

A step-by-step guide to selling condo/landed

get an agent

Rent with an Agent

Dedicated experts at your service

do it yourself

Prefer to do-it-yourself?

Check out how our platform can help

Browse Rental Listings

Download the app and connect with landlords

RESOURCES

How to Rent an HDB

A step-by-step guide to renting HDB

How to Rent a Private Property

A step-by-step guide to renting condo/landed

get an agent

Lease with an Agent

Dedicated experts at your service

Lease Documentation

Leave the paperwork to us

do it yourself

Prefer to do-it-yourself?

Check out how our platform can help

Post a Listing for Free

Download the app and connect with tenants

RESOURCES

How to Lease my HDB

A step-by-step guide to renting out an HDB

How to Lease my Private Property

A step-by-step guide to renting out condo/landed

FEATURED ARTICLES

Ohmyhome Raises US$5M in Series A+ Funding

Ohmyhome, the leading Property 
One-Stop Shop Platform

ARTICLE CATEGORIES

HDB

All things about public housing

Private Property

All things about private property

Home Improvement

Guides for must-know reno tips

Financing

All about mortgage solutions

Towns

Singapore townships in focus

Client Stories

Success stories from customers

Founders’ Message

From the desks of Rhonda & Race Wong

Social media

Other