HDB loan vs bank loan, which is better for you?

When it comes to buying a HDB flat, oftentimes the debate of which home loan to get to finance your new flat comes to mind.

Of course if you ask any fresh new homeowners, or heck, even any HDB home owner, more often than not, they would immediately tell you to opt for a HDB loan. But why? Is a HDB home loan truly better than a bank loan, or is everyone just quick to pick the HDB loan because everyone else is telling them to?

This begs the question, HDB loan vs bank loan? Which is better? Or more importantly, which is better for you? Obviously both loans carry their own merits. One can’t just simply say that one is better than the other. The two have their own personal pros and cons and it really depends on the preference of each individual.

That is exactly what we will be covering in today’s article. And to make it even simpler for you, we have put it in table format so that you can easily compare the two to see which better suits you and your needs.

	HDB Loan	Bank Loan
What is it	A loan from the Housing & Development Board (HDB)	A loan from any local or foreign bank in Singapore
How to apply	Directly from the HDB website (Housing Loan Eligibility/ HLE)	Directly from any bank or mortgage brokers
Loan eligibility/ who can apply	Citizenship (at least one owner has to be a Singaporean citizen) Household income ceiling (Singles max $7K, Families max $14K, Extended families max $21K)	Good credit score No income ceiling Meeting Total Debt Service Ratio (TDSR) and Mortgage Servicing Ratio (MSR) criteria
Property eligibility	HDB only	HDB and private properties
Minimum loan amount	None	Usually $100,000
Maximum loan amount/ loan to value limit	You can borrow up to 90% of property value	You can borrow up to 75% of property value
Interest rate	2.6% (pegged at 0.1% above CPF OA interest rate)	Depends on the market climate, it is currently around 1% which is lower than HDB loan
Downpayment	10% downpayment Full 10% can be paid using CPF OA (currently BTO and Sale of Balance downpayment is split into two tranches of 5%)	25% downpayment 5% has to be paid in cash 20% can be paid in cash or CPF Ordinary Account
Early repayment penalty	None	1.5% to 1.75% depending on the bank and loan applied for
Late repayment penalty	7.5% late payment fee per year	Typically higher (depending on the bank and loan applied for)
Monthly repayment	Fixed interest rates	Depending on loan applied for, but usually fixed rates are only valid for 2 to 3 years and variable after that

(Information is valid as of 16 Aug 2021)

Key takeaways:

HDB loans allow you a loan quantum of up to 90% of the property value while bank loans only allow up to 75%. This means that with a HDB loan will require less cash upfront as compared to a bank loan.
HDB interest rates are fixed at 2.6% while bank loans are dependent on other factors, for example which bank you apply with and the loan you take up. However, bank loan interest rates are currently much lower than that of the HDB loan.
HDB has no early repayment penalties which mean that you can pay off your loan early if you have the means while banks loans will charge an interest rate for an early repayment.
Starting off with a HDB loan allows you to switch over to a bank loan later on, also known as refinancing. However, if you start off with a bank loan, you are no longer eligible for a HDB loan.

With all that in mind, we can safely say that there is no right or wrong choice when it comes to how you want to finance your home. It really does, at the end of the day, depend on you and what feels financially right to you. If you do, however, need any advice or more clarification on this matter, do feel free to contact us at the button below.

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