Should You Get A Bank Loan For Your HDB Flat?


Choosing between a HDB loan and bank loan is no easy decision. Each loan has its benefits and drawbacks, among other factors to consider.

Maybe the better question is what motivates you more – cost savings or convenience.

While a HDB loan may be costlier due to its higher interest rate, it is flexible and requires a smaller downpayment.

Hence if you don’t mind paying more to avoid the restrictions of bank loans, a HDB loan is your answer.

But if you want a lower interest rate, choosing a bank loan – with its restrictions and a higher downpayment – is an option.

However, although cost and convenience may influence your decision when choosing between a HDB loan and bank loan, there are other considerations.

This detailed article has all you need to know about a bank loan for HDB and a HDB loan, their pros and cons, and much more.

What To Know About A HDB Loan

A HDB loan is only used when you want to purchase a HDB flat from the Housing & Development Board in Singapore.

If you want to buy a private residence, this loan is not an option, and you might have to seek a bank loan.

The housing loan amount for HDB loans is determined by the buyer’s age, monthly income, and financial situation.

If you purchase an unfinished apartment directly from HDB, it will assess your financial situation just before the apartment is finished in order to disburse the housing loan.

To determine how much you can borrow, you need to obtain a HDB Loan Eligibility (HLE) letter. The letter is only valid for six months, during which you have to make your application.

HDB loans have a maximum repayment term of 30 years, or until the buyer reaches the age of 65, or the remaining lease at the time of application is minus 20 years, whichever is shorter.

HDB’s interest rate is set at 2.6% – 0.1% higher than the current interest rate for the Central Provident Fund (CPF) Ordinary Account (OA).

Key Differences Between A HDB Loan And Bank Loan

While both are options for Singaporeans to own a home, they are quite different. Depending on your financial status, you might find one meeting your needs better than the other.

Here are some of their key differences.


There is a 15% minimum downpayment required for an HDB loan. If you have sufficient funds in your OA, you may use CPF to cover your downpayment in full.

You will need to pay much more if you obtain a bank loan. The initial HDB bank loan downpayment is 25%, of which 5% must be in cash.

This means that for even a moderately sized property, you should be ready to spend around $15,000.

Interest Rate

The interest rate for HDB loans is currently 2.6% and hardly ever changes.

On the other hand, bank rates are usually based on the current Singapore Overnight Rate Average (SORA) rates, which are typically higher and more erratic.

In addition, banks offer a wide variety of home loan packages with different floating rates.

Consequently, you can enjoy between a two- to three-year interest rate guarantee under a fixed loan package. After that, the market will decide what the rate will be.

Lock-In Period

The lock-in period for banks is typically two to three years. During this time, you will be charged a penalty of about 1.5% of the loan amount if you want to pay off your loan sooner.

Note that once you decide to take out a bank loan for your mortgage, you won’t be able to finance your home with a HDB loan.

On the other hand, for a HDB loan, there is no lock-in period, so there won’t be any fees if you decide to pay your loan off early. This means that you can refinance your loan with a bank if you want to benefit from lower interest rates.

However, you won’t be able to switch back to a HDB loan after refinancing your HDB loan with a bank.

Loan-To-Value (LTV) Limit

The LTV limit for HDB loans is currently at 80% as announced on 30 Sep 2022. It was previously 85%.

Although it might seem advantageous to be able to borrow more money, getting a larger loan may result in you paying more interest overall.

Also, keep in mind that CPF balances are a factor in the 80% limit.

Your CPF OA balance must be cleared by HDB to a maximum of $20,000. This means that if you have a huge CPF balance, you might not be able to get an 80% LTV loan.

On the other hand, bank loans only cover up to 75% of the purchase price.

The difference means that you will be required to pay a larger downpayment from your pocket, especially if you don’t have much CPF savings.

HDB Refinancing

The benefit of taking out a HDB loan is that, should you change your mind, you have the option of refinancing to a bank loan as there is no lock-in period for a HDB loan.

However, there is no way to refinance a bank loan for HDB. If you reprice, you can only refinance with other banks or with the same bank.

Pros And Cons Of A HDB Loan

Choosing a HDB loan over a bank loan has its benefits and disadvantages.


  • Only 20% of the purchase price must be paid as a down payment, which a HDB CPF payment can fully cover.
  • Your loan limit is up to 80% of the buying price.
  • The interest rate for a HDB loan is less prone to fluctuations because they are tied to the CPF OA interest rate.
  • You have the option for flexible refinancing as it doesn’t have a lock-in period.
  • With no fee for early repayment, you can pay off your loan using CPF early without incurring any penalties.


  • Has a higher interest rate of 0.1% above the interest rate of the CPF OA.
  • The higher LTV, in combination with a higher interest rate, would result in an expensive home.

Pros And Cons Of Getting A Bank Loan

Banks and other private financial institutions, including money lenders, also issue loans for home purchases. You may try with them if you don’t qualify for an HDB loan. Here are their benefits and disadvantages.


  • Lower interest rate packages than HDB loans.
  • You can renegotiate your mortgage for the lowest interest rates available.
  • There are fewer restrictions when applying. For instance, there are no income ceiling conditions for banks.
  • The maximum bank loan for HDB depends on your Mortgage Servicing Ratio (MSR).


  • A downpayment of up to 25% of the purchase price is required, out of which at least 5% must be paid in cash.
  • Your ability to repay a bank loan early is restricted by the lock-in period. Doing so will result in an early repayment penalty of 1.5% of the loan balance.
  • Interest rates are inconsistent and constantly changing in response to market changes.
  • During the mortgage period, switching to a HDB loan is not possible.

Eligibility Criteria For A HDB Loan And Bank Loan

The first thing you should do before applying for a HDB loan or bank loan is to check if you qualify for either.

HDB Loan

You have to meet the below requirements for applying for a HDB loan in Singapore.

  • At least one applicant for the HDB has to be a Singapore citizen
  • Have an HLE letter.
  • You must not have two HDB mortgage loans. You cannot apply for a third HDB loan. Your last property cannot be private residential property if you have taken out a single HDB housing loan.
  • In the previous 30 months, you must not have owned or sold any private residential property.
  • For families, the average gross monthly income must be below $14,000.
  • For singles purchasing a two-room new apartment in a non-mature estate or a five-room or smaller resale apartment, the average gross monthly household income must be less than $7,000.

Bank Loan

To qualify for a bank loan, there are no restrictions as outlined above for HDB. However, your application may be affected if you have a low credit score or a bad repayment record.

Here are some of their requirements:

  • A minimum annual income of $24,000 or a total annual income of $36,000 is required of the applicant(s).
  • Your bonuses, commissions, overtime, and other income sources may be taken into account at the bank’s discretion.
  • Most lenders set 21 years as the minimum age requirement.
  • The maximum age of the applicant should be 65 years old.

Why The TDSR And MSR Matter

All loans are subject to the Total Debt Servicing Ratio (TDSR), which mandates that only 55% of a borrower’s gross monthly income may be used to pay debts.

Only loans for HDB flats are subject to the Mortgage Servicing Ratio (MSR), which caps monthly repayments at 30% of the borrower’s gross monthly income.

The MSR is applicable whether you choose a HDB loan or a bank loan as long as you are purchasing a HDB flat.

Therefore, even though you may not have utilised your TDRS of 55% of your gross monthly income, the maximum you can commit for your HDB flat is still 30%.

If your MSR is higher than 30%, then you can:

  • Extend the loan tenure
  • Sell or reduce your repayments on other properties, or
  •  Reduce the amount to borrow by paying more downpayment

Weigh The Pros And Cons Carefully

Deciding to go for a HDB loan or a bank loan for HDB is never simple.

Your personal preferences and financial situation will come into play when you and your loved ones are choosing a loan that best suits your family’s needs.

HDB loans now require a 20% downpayment using your CPF or cash. You have the freedom to pay the entire downpayment amount with your CPF, or opt for staggered payments of 5% and 15%.

In addition, it has a fixed interest rate to enable consistent repayments, which is good for making future financial plans.

But a bank loan is an option if you are no financial constraints and have extra cash on hand for the downpayment.

The interest rate is much lower, and the lower LTV will enable you to utilise more savings.

Owning a HDB flat is a great step to securing a family home.

But if you do not qualify for a HDB loan or need financing for the downpayment, apply for a loan at BST Credit.

If you need help, contact our experienced loan officers, who will be more than happy to assist you. Or apply for a loan with us now.

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