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


Are you considering getting a loan but torn between choosing HDB or a bank?

HDB loan or bank loan is a common question asked by many when they want to borrow money. Both loans are similar in some ways while different in other ways.

But, HDB loan has lower interest rates among all loans. With the help of this article, you will be able to decide which one is better for you.

HDB Loan Vs Bank Loan

Both bank loans and HDB better referred to as HDB housing loans have advantages and disadvantages.

Below is an overview of the key differences between the two loans.

Type Of LoanHDB LoanBank Loan
Sources Of The LoanA home given by Housing & Development Board (HDB)A home loan from different banks in Singapore i.e UOB, DBS
Eligibility Of A BorrowerA number of requirements to qualify like citizenship requirements and income ceiling.Works best with a good credit score and there you have the loan.
Property EligibilityCustomers are eligible for HDB flats alone.One can get private property and HDB flats.
Minimum Loan SizeNoneAt least $100,000
Loan-To-Value LimitOne can be eligible to borrow up to 80% of HDB flats value.One can borrow up to 75% of the property value.
Interest RatesStands at 2.6% p.a currently and pegged at +0.1% of CPF OA interest rateCurrently its 2.70% for floating rates and 3.45% for fixed rates. All these depends on prevailing market situation.
DownpaymentComes at 20% of the buying price, payment can be fully made with CPF Ordinary Account(OA) savings. NB: You need to pay $5,000 as deposit to the seller for resale flats.Comes at 25% of the buying price and a minimum of 5% in cash (Up to 20% from the total CPF OA savings)
Maximum Loan TenureUp to 25 yearsUp to 30 years
Type Of PackagesHas one typeComes with floating rate packages, some hybrid packages while others fixed rate packages.
Early Repayment Or Prepayment PenaltyNoneRanges between 1.5% to 1.75%
Penalty For Late Repayment7.5% p.a. but negotiableThe penalty varies per bank

With these varied differences, you can choose what works best for you. Remember what worked out for your friend might be a bitter pill on your side.

All you have to do is self-evaluate to settle on the best loan for your housing needs even if it’s a bank loan HDB.

Pros And Cons

  • HDB loans come with higher interest rates but fixed.
  •  Bank loans have low-interest rates but are usually valid for 2 to 3 years at most
  • You are eligible to borrow more at HDB (80%), compared to a lower ratio for a bank loan (75).
  • HDB loans give room for a full downpayment using CPF in case one has enough savings. On the other hand, banks need you to pay at least 5% of the downpayment in cash.
  • HDB loans don’t have an early repayment penalty while banks charge 1.5% for the same.


Irrespective of the loan you choose to take, the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) apply.

These are restrictions put in place by the Singaporean government to ensure borrowers only go for what they can afford to repay.

Total Debt Servicing Ratio (TDSR)

TDSR restricts all home buyers in Singapore. The rates were revised from 60% to 55% as of December 2021. This basically means the amount you can borrow can’t be more than 55% of your monthly income.

Additionally, TDSR is also a restriction to your liabilities, not mortgage alone. If you are servicing other loans, you may not be able to qualify for a housing loan or may be able to qualify for a less loan.

Mortgage Servicing Ratio (MSR)

When buying HDB property with executive condominiums, you will be restricted. MSR will restrict you as it states your monthly mortgage repayments shouldn’t exceed 30% of a borrower’s monthly income.

This is an increase that came into effect on 30 Sep 2020 and is applicable to loan applications including mortgage HDB.

Key Considerations For A HDB Loan Vs Bank Loan

When choosing the best loan to settle on, there are key considerations to make including:

  • LTV Ratio

Bank loans have a tight LTV compared to HDB loans. As of Sep 2022, new property cooling measures put in place had HDB loans LTV adjusted from 90% to 80%. This reduced the amount home buyers could borrow from HDB.

Despite this, you can still borrow more from HDB than if you go for a bank loan. Bank loans only cover 75% of the buying price.

You will have to raise the 5% downpayment from your own cash which can be hectic if you got an already dented wallet or CPF savings.

  • Interest Rates

Bank loans tend to have more volatile interest rates compared to HDB which is more stable. Bank interest rates are subject to change as per the prevailing market situation. So, during the repayment period, it can keep on changing.

Interest rates for HDB loan still stand at 2.6% p.a. from July 1999 making it ideal for borrowers who are risk-averse. The monthly repayments rates are predictable making it easy for planning.

  • Downpayment

Banks need higher downpayments as opposed to HDB loans. You will pay a 25% downpayment for a bank loan with at least 5% being in cash and the 20% coming from your CPF or housing grants.

HDB bank loan downpayment requires 20% that can be paid in full if you have enough CPF OA savings. It implies you may not cough out a dime for the downpayment with this loan if your savings are upbeat.

  •  Penalties

When taking home loans which are a long-term commitment, banks tend to have higher penalties. For early repayments, bans charge between 1.5% to 1.75% within the lock-in period when reducing the loan size.

On late repayment fees, charges differ from one bank to another, and it’s hard to get a waiver or reduction.

HDB loans on the other hand are more flexible with room for changes depending on your financial situation. You can pay the amount you want in case of a windfall without any penalty.

You can equally switch to bank loans for lower interest rates years after getting a loan.

  • Refinancing Option

You can refinance from an HDB loan to a bank loan when there is a need. But can’t switch from a bank loan for an HDB housing loan.

The only option you have in a bank loan for HDB is to refinance with another bank for a competitive interest rate or look for a new package from the same bank.

Alternatively, contact our mortgage experts for advice and guidance if you’re puzzled about refinancing your bank loan vs HDB loan.

Eligibility Criteria For A HDB Loan And Bank Loan

If you want to finance a property like a condo, you may not be eligible to be granted an HDB bank loan. The only option remaining can be to get a bank loan.

However, when purchasing an HDB flat, either a resale flat or a new property, you are eligible for an HDB loan.

HDB Loan Eligibility

  • Citizenship

You must a Singapore citizen to apply for the loan

  • Past Home Loan Ownership

A buyer must not have taken two or more HDB bank loans previously. One should also have taken only one HDB housing loan and the last property ownership wasn’t a private home or residence.

For example, property gifted by another, a HUDC flat, the property got as a result of inheritance under a will or Interstate Succession Act, and/or property acquired of through nominees.

  • Income Ceiling

Must not be more than $14,000 for a family, $21,000 for an extended family, and $7,000 for single people buying a smaller resale flat, a 5-room or a 2-room flat in an estate of non-mature status under the Single Singapore Citizen Scheme.

  • Property Ownership

You should not be owning any other property in the locality or overseas and shouldn’t have disposed of any property in the last 30 days before applying for an HDB housing loan.

Besides, you should not be owning more than 1 hawker/market stall or commercial property. In the case of ownership, you must be having your business operate without any other income source.

Know that you have to get an HDB Home Loan Eligibility (HLE) letter if you want to get an HDB loan. All this information is readily available on the HDB website.

Bank Home Loan Eligibility

Unlike the HDB loan’s eligibility criteria, a bank loan has a relaxed stringent measure. Individual banks have each assessment method but, in all of them having good financial health plus a good credit score makes you qualified for a loan.

If you want more insight into bank loan criteria, or want guidance, one of our friendly experts will be readily available to help you.

Get Your Preferred Housing Loan Today

With the two loans at hand, the best personal finance loan in Singapore depends on your preference.

HDB is better if you can pay the loan early or when your risk averse. The downpayment is lower and stands better chances if you preempt missed repayments. Though you’ll encounter a higher interest rate with less tax on cash flow.

If you’re up to date with the housing market, a bank loan could be relatively cheaper. But you must understand terms and conditions because of the unforgiving nature of banks.

In case you need help, you can reach out to our BST Credit home loan experts to guide on the best course of action.

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