HDB Loan vs Bank Loan for Purchasing HDB Flats in Singapore

When you are buying a HDB flat in Singapore, whether it's a BTO flat or a resale one, you can choose either an HDB loan or a bank loan for your housing financing. However, for private condominiums, only bank loans are available. This article will discuss the differences between these two types of loans as well as related issues.

Loan Eligibility

Down Payment

HDB Housing Loan

Down Payment: At least 25% of the purchase price, which can be paid in full using your CPF Ordinary Account (OA), with cash, or a combination of both.

Maximum loan amount: Up to 75% of the purchase price for new flats. For resale flats, it is 75% of the resale price or HDB valuation (whichever is lower).

Bank housing loan
Down Payment: 25% of the purchase price, with 5% payable in cash and the remaining 20% payable in cash or your CPF OA savings.

Maximum loan amount: Up to 75% of bank valuation or purchase price (whichever is lower).

Interest Rates

HDB Housing Loan
Currently fixed at 2.6% per annum（pegged at 0.1% above the OA interest rates）

Bank housing loan
Bank housing loans offer fixed interest rates for a pre-determined time period, usually one to three years, before reverting to floating rates. The floating interest rates are pegged to a benchmark such as the Singapore Overnight Rate Average (SORA) and are affected by market fluctuations.

The following table shows the mortgage interest rates of some common banks for reference only.

*Updated on December 24, 2024

Loan Tenure

The maximum loan tenure for HDB housing loans is 25 years, while that for bank housing loan is 30 years.

Lock-in Period

HDB Housing Loan
There is no lock-in period for an HDB housing loan. So, if you want to pay off your loan early, there will be no penalty. This also means that you can choose to refinance your loan with a bank anytime.

Bank housing loan
On the other hand, most banks have a lock-in period, usually one to three years. If you want to repay your loan early or refinance your housing loan with another bank during the lock-in period, you will face a penalty that is usually about 1.5% of the remaining loan amount (depending on the terms of your bank loan).

Refinancing

HDB Housing Loan
You can choose to refinance to a bank housing loan at any time, subject to the bank's approval. Note that once you refinance your HDB housing loan with a bank, you will no longer be able to switch back to an HDB housing loan.

Bank housing loan
Refinancing your bank housing loan into an HDB housing loan is not possible. These are your options:
● Repricing with the same bank: you can reprice your existing bank housing loan with the same bank to get a lower interest rate.
● Refinancing with a different bank: you can refinance your bank housing loan with another bank to potentially obtain lower interest rates and/or more favorable terms.

Choosing between HDB Loans and Bank Loans?

Comparing the two, an HDB housing loan offers stability and a lower interest rate, while a bank housing loan offers flexibility and the potential for lower interest rates in the future. When making a choice, you must carefully consider your financial situation, risk tolerance, and long-term plans. The best choice depends on your personal situation and financial priorities.

When doing financial planning for home purchases, it's important to remember that you will have to strike a balance between your current financial needs and long-term goals.  Although your CPF (OA) can be used for buying a house, it is mainly for your retirement.

If there's no urgent need to use the funds in the OA, consider paying for the house partially in cash and leaving at least $20,000 in the OA as a safeguard. In this way, you can continue to earn a risk-free interest of up to 3.5% per annum (including extra interest) to build up your retirement fund.