HDB Loan Vs Bank Loan – Which Is Better For You?


When it comes to taking out a loan for your home in Singapore, you have two main options: an HDB loan vs bank loan. You will have to decide whether to take out an HDB loan or a bank loan. If you are looking to purchase a property in Singapore but are uncertain which loan option is the best for you, here is an in-depth analysis of both.

It’s important that you understand how the HDB and the bank loan work so you can make an informed choice. In this article, we discuss the pros and cons of both HDB loans and bank loans. Read on to find out more.

HDB Loan Vs Bank Loan

HDB loan vs bank loan: Which one suits your needs? The answer to this question will depend on individual circumstances. However, in this section, we look at key differences.

HDB loans are concessionary housing loans from the Housing And Development Board that you can use to buy HDB flats. Bank loans are financing from financial institutions that you can use to purchase any property. Here are the main differences between the two types of loans:

Interest Rates

The interest on a HDB loan is fixed over a period, while the interest on bank loans fluctuates depending on market factors.  HDB loans currently have an interest rate of 2.6% capped at 3%, while banks charge an interest rate of 1% to 3%.

Although banks are expected to raise their interest rates, HDB loans mostly have a higher rate. If you would like to save on the cost of the loan, you may opt for a bank loan.

However, HDB loans offer you stability as they have a fixed rate. You know how much you need to pay each other, and as such, you can plan accordingly.

Loan -To- Value Ratio (LTV)

Banks offer 75% LTV, whereas HDB offers 80% of the property’s value. This means you’ll need a down payment of 25% if you go with a bank and 20% if you go with HDB.HDB offers you more money while you are purchasing your property.

The downside of this is that you will pay back a higher amount if you sign up for a HDB loan. A higher amount means more interest and a higher loan cost in the long run.

Penalty For Early Repayment

Banks will charge you if you repay your loan before schedule. Banks may charge you up to 1.5% in penalties if you repay the loan early. HDB does not have a lock-in period, and you can therefore pay the loan early with no penalties.

You Can Refinance A HDB Loan But Not A Bank Loan

A HDB loan can be converted into a bank loan, but not the other way around. Bank loans have a lock-in period during which you can’t refinance. In case you change your mind, you can only refinance through other banks or reprice the loan.

Banks Are More Strict On Repayment Terms

If you miss a payment, HDB is more forgiving than a bank. Banks charge a specific amount for every late payment you make. HDB is more lenient and only charges a 7.5% late payment fee per year.

Here is a comparison of HDB loans vs. bank loans.

HDB LoanBank Loan
Interest Rate2.6% capped at 3%Ranges from 1% to 3%. May rise to 3% in the coming years.
RepaymentFixed amount due to fixed ratesVariable due to fluctuating interest.
LTV80% of the value of the property.75% of the value of the property.
Downpayment20%. You can use your CPF fundsYou must pay 5% in cash and 20% using CPF funds
Early RepaymentNo penalty for early repaymentPenalty for early repayment
Late PaymentLenient and charge 7.5% per year for late paymentsVery strict. May charge $50 per late payment.

Pros And Cons

Both loans have their pros and cons. Here is a breakdown of that.

Pros Of HDB Loan

HDB loans have the following advantages.

  • A fixed interest rate makes it easy to plan your cash flow.

It is easier to plan your cash flow when you know how much you should pay every month.

  • A higher LTV ratio makes it easier to acquire property.

A higher LTV makes it easier for first-time owners to acquire property with ease.

  • Flexible repayment terms

HDB allows you to repay your loan early with no penalties.

The Drawbacks Of A HDB Loan

  • HDB loans can only be used to purchase HDB properties.

You can’t use the HDB loan to buy private property. The loan was specifically used to purchase HDB flats.

  • Higher interest in times of falling rates

In times when there is a drop in interest, you will pay more if you opt for a HDB loan.

Pros Of A Bank Loan

Here are the main advantages of a bank loan:

  • Lower interest in times of falling rates

When the overall rates are falling, you get a lower interest rate, which means the cost of the loan is lower.

  • You can purchase any property.

Unlike HDB loans, which are specifically used to buy HDB flats, the bank allows you to choose the property you would like to purchase.

 Cons Of A Bank Loan

  • Banks offer a lower LTV, and this may not be favorable for first-time home buyers.
  • stricter, with a higher late payment penalty.
  • Charge early repayment penalties.
  • You need to pay a higher downpayment when purchasing a property.


The total debt servicing ratio (TDSR) is the ratio of debts you are servicing in comparison to your income. The TDSR in Singapore is set at 55%. This means your debts should not exceed 55% of your monthly income. All borrowers must follow the TDSR measures put in place when looking for a loan.

The mortgage service ratio (MSR) is the amount that goes to your mortgage. The MSR rate is set at 30%. This means that your mortgage repayment should not exceed 30% of your Income.

Key Considerations For A HDB Loan Vs  Bank Loan

Before you choose the kind of loan you want to apply for, here are the key considerations you should make.

Type Of Property You Want To Buy

HDB loans are ideal for first-time home buyers or those who have just started working. You can take a HDB loan and use your CPF savings to pay for the downpayment.

On the other hand, if you don’t want to own private property, you will need to apply for a bank loan.


Bank loans have a higher down payment. It’s important to assess how much you can raise for a down payment. You can use CPF funds to pay for the down payment.

Stable Interest Rates

It’s easier to make a budget when you know how much you need to pay monthly. As a result, unlike bank loans, which have fluctuating interest rates, HDB offers fixed interest, allowing you to plan your cashflow.

 Eligibility Criteria For A HDB Loan And Bank Loan

Depending on your needs, here are the eligibility criteria for HDB and bank loans.

 HDB Eligibility Criteria

  • At least one of the buyers must be a Singaporean citizen.
  • The borrower should not have two or more HDB housing loans and have owned a private property previously.
  • Families must not exceed an income of $14,000, $7,000 for singles, and $20,000 for extended families to qualify for the loan.
  • You don’t own any other property in Singapore or overseas.

Bank Loan Eligibility Criteria

The eligibility criteria for banks is not as stringent as that of HDB. To qualify for a bank loan, you must have

  • A good credit score and history
  • proof of income.

HDB Loan Vs Bank Loan – which is your choice? There is no right or wrong answer when it comes to choosing between an HDB loan and a bank loan. It depends on your financial situation and what is most important to you. If you are looking for the lowest interest rate, then a bank loan is probably the better option. However, if you are trying to minimize your down payment, then an HDB loan might be a better choice.

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