Should you take a HDB home loan or a bank loan?

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When it comes to taking a home loan in Singapore, there are two options available to you: a HDB home loan or a bank loan. One is not necessarily always better than the other. Which should you take? Let’s take a look at each so that you can decide for yourself.


HDB Home Loan


HDB home loans from the Housing & Development Board of the Singapore government are available to Singaporean citizens. The loan comes with a concessionary interest rate which is equal to the prevailing CPF interest rate plus 0.1 percent.


To be eligible for the loan, you (or your spouse) must be a Singapore citizen, your combined monthly household income must not be more than $10,000 (or $15,000 in the case of an extended family), you must not own any private residence (whether in Singapore or abroad), you must not have sold a private residential property or taken an HDB loan within the last 30 months. There are also a few other criteria that you can find in the HDB website.

Despite this, HDB home loan is popular because for the following reasons:

  • It comes with a higher CPF withdrawal limit. There is no limit if you are purchasing directly from HDB. Also, there is no limit to the saving in the Ordinary Account you can use on the resale of an HDB flat after you have set aside 50% of the prevailing Minimum Sum.


  • There is no need to make a down payment in cash. You can pay the entire amount with the balance in your CPF ordinary account if you wish to.


  • Since the interest rate is based on CPF rate, which has remained unchanged for over a decade, you can expect to pay the same interest rate for many years. Currently, the interest rate of a HDB loan is 2.6%.


  • The loan-to-value (LTV) ratio is as high as 90% of the value of the house. This means you can get a loan of up to 90% of the value of the home you are buying.


  • Because HDB is a government agency, it is more lenient towards delinquent borrowers. If you have fallen in financial hardship, you can even get a deferment of your monthly payment.

Bank loan

Bank loans are made available by banks operating in Singapore to citizens and permanent residents of Singapore. There are several different types of loans that include fixed interest rate loan, variable interest rate loan, and loans with interest rate pegged to Singapore Interbank Offered Rate (SIBOR).


Many Singaporeans choose to take bank loan because:

  • Their combined monthly household income exceeds $10,000, or they already own a private residence, or they have already taken an HDB loan. All these factors disqualify them from an HDB loan.


  • Bank loans have lower interest rates. While interest on HDB loan is 2.6% currently, interest on bank loans range from 1.30% to 2.10%. The most popular type of bank loans are SIBOR-pegged loans because the interest rates are lower.


  • Interest rates change every quarter, which can make monthly payments complicated (for you). Even fixed interest rates are not permanently fixed.


  • The loan-to-value (LTV) ratio is up to 80%, which is lower than the LTV ratio of HDB home loan.


  • Banks are not as lenient as HDB to delinquent borrowers. If you are even a day late, you will be charged a late payment fee.

Now that you know the differences between HDB loan and bank loan, it is up to you decide which suits you better. If you decide on taking a bank loan, make sure to compare mortgage loan rates in Singapore before signing up with any bank.


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