bank loan vs hdb loan

Bank Loan vs HDB Loan: A Complete Homeowner’s Guide

In essence, you have two choices for financing an HDB flat – a bank loan or an HDB loan. And the confusion starts here as there are crucial things to consider such as interest rates, lock-in periods, loan terms, and a whole lot more.

Buying a home is also one of the most expensive purchases you’ll be making in this lifetime. So, if you are daunted between choosing between HDB and bank loans, read on and find out whether choosing a bank loan or an HDB is the right one for you.

At a Glance: Bank Loans Vs. HDB Loans

Bank Loans

HDB Loans

Interest Rate

  • Fixed Rate (for the lock-in period)
  • Floating Rate (after the lock-in period)
Fixed at a current HDB interest rate of 2.6%

Minimum Downpayment Requirement

25% of your HDB flat’s purchase 10% of your HDB flat’s price

Loan-to-Value Ratio

Up to 75% of the purchase price

Up to 80% of the purchase price or value

Maximum Loan Tenure Up to 30 years

Capped at 25 years 

Lock-in Period Usually between 2 to 3 years

No lock-in period


HDB Loan Vs. Bank Loan: Which Is The Better Option?

After finally deciding to get an HDB flat, you’re down to choosing between a housing loan from banks or an HDB loan. Bank loans are known for their low-interest rates while HDB loans are known for their low down payment requirements. Still, it depends on eligibility and your current situation which one fits better. 

But don’t worry, we’ll help you with this as we define them in detail, including their best features, and how they differ. Understanding them will help you make a more affordable purchase.

What is a Bank Loan for Housing?

Bank home loans are funds borrowed from banks to finance a home property purchase. These are secured loans wherein your property is used as collateral for the loan. Banks have their own set of eligibility and this includes the borrower’s:

  • Income
  • Age
  • Residency status
  • And other internal credit requirements

In some cases, some buyers will not qualify for an HDB loan and have no choice but to use a bank loan. But if your current situation allows you to decide between the two, you must also check out their respective pros and cons.

Bank Loans: Pros and Cons


  • Lower overall mortgage cost.

While low-interest rates are not guaranteed, you can still be offered reasonable rates depending on your credit score and creditworthiness. This will result in a cheaper overall loan cost.

  • Can be repaid for a longer tenure.

Bank loans have a maximum repayment period of thirty years. However, you’ll only acquire the property title after completing the loan.


  • Low bank rates are not guaranteed.

Low bank interest rates are only the most attractive in the first two to three years. Usually, the low-interest rates offered by banks are not guaranteed past the lock-in period. Such that the fixed rates become floating rates after the fixed period.

  • Banks require a higher down payment.

Bank loans require a down payment of 25%, 5% of which has to be paid in cash. While an HDB requires a lower down payment and is also payable through CPF.

  • Banks have high-income requirements.

You’ll need at least S$30,000 monthly income to qualify for a bank loan.

  • Bank loans don’t come with home protection schemes.

If you default on a loan due to unforeseen events such as death or sickness, your home property will be at risk. This event will also put your family members in a difficult situation.

Eligibility for a Bank loan:

Banks also have specific requirements for their bank loans. Below are some of the requirements.

  • Singapore Citizens, Permanent Residents, and Foreigners 
  • A good credit score – preferably better than BB
  • Minimum required yearly income is $24,000 for single borrowers, $36,000 if there’s a co-borrower, and twice this amount if the borrower is a foreigner

What are HDB Loans?

HDB concessionary loans are a provision for Singaporeans and are financed by the Housing and Development Board. The HDB loan interest rate is currently pegged at an interest rate of 2.6% per annum. Unlike bank loans, HDB loans can’t be used to finance private property purchases. You can only use it to fund an HDB flat purchase

HDB Loans: Pros and Cons


  • HDB loans have currently lower interest rates than banks.

Banks loans are marketed to offer lower home loan rates and are often tied to SORA (Singapore Overnight Rate Average) or fixed deposit home rates. However, in Singapore’s current market, HDB loans have lower interest rates than banks at only 2.6%.

  • Allows you to get mortgage-reducing insurance through CPF

If you pay your HDB loans through CPF, you will be required to subscribe to a Home Protection scheme. This scheme will protect you and your family members in the event of death, terminal illness, and permanent disability. It will protect you as the CPF board will absorb the outstanding loan in such circumstances.


  • Not everyone is eligible for an HDB loan.

An HDB loan requires at least one buyer to be a Singapore Citizen. This means that foreigners do not qualify for this loan.

Eligibility of an HDB Home Loan

To qualify for an HDB loan:

  • At least one buyer must be a Singapore citizen
  • Have not taken two or more HDB loans before application
  • Has a monthly household income of S$14,000 (for extended families S$21,000 and singles S$7,000)
  • Must not have owned or disposed a private residential property thirty months before the home loan application 
  • The remaining lease of the property must last until the youngest buyer is 95 years old.

Remember that the pros and cons may weigh differently depending on your unique financial situation. Ensure that you’ve researched thoroughly or consulted a financial advisor for enlightenment.


Things to Consider When Choosing Between a Bank Loan or an HDB Loan

Weighing between a bank loan and an HDB doesn’t stop looking at the pros and cons. You must also look at crucial factors such as interest rates, loan tenure, loan-to-ratio value, and other relevant terms. 

1. Interest Rates

Most banks offer both fixed rates and floating rates, which may fluctuate from time to time. While for HDB loans, the current interest rates are pegged at 2.6%. Your risk appetite is a crucial factor when choosing between the two options.

2. Loan Tenure

With HDB loans, the maximum loan repayment period is either 25 years or computed at 65 minus the age of the borrower. If there are two borrowers, such as spouses, the age will be computed by the average.

3. Loan Amount

The maximum loan amount one can borrow for a bank or HDB loan will depend on the borrower’s LTV ratio. There is no mandated minimum loan amount for HDB loans.

4. Loan-to-Value Ratio (LTV)

The loan-to-value limit for banks is set at 75%, while it is set at 80% for HDB loans during the recent revisions last September 30, 2022.

5. Mortgage Servicing Ratio (MSR)

HDB loans have an MSR of 30%, meaning your monthly loan repayment amount cannot exceed 30% of your income. If you have a variable income, your MSR will again be computed based on the average, less the 30% MSR margin. 

young couple holding house while working from home

Key Differences Between HDB Loans and Bank Loans

The key differences between an HDB loan and a bank loan lie in three factors: the down payment, the interest rates, and the lock-in period. We’ve already dissected these earlier, but let’s take another closer look at these three important factors to help you decide better.

Check the table for a quick view of how they differ:


Interest Rates

Lock-in Period

Bank Loans

25% (5% cash, 20% cash or CPF) May fluctuate with market conditions Yes 
HDB Loans 10% Pegged at 2.6% or 0.1% above OA interest rate



1. Downpayment

An HDB flat requires a downpayment of 10%, which may be paid in cash or through your CPF-OA. You will also have to use the available savings in your OA account to pay for your balances. However, you can leave up to S$20,000 in your OA to earn interest or be used for other emergencies.

A bank loan, on the other hand, will require you to make a downpayment of 25%. 5% of which should be paid in cash, while the remaining 20% may be paid in cash or CPF. 

2. Interest Rates

Banks offer home loans at fixed rates and floating rates. The fixed rates may apply during the lock-in period, while the floating rates may apply after. Thus, you may pay less or more interest costs. With HDB loans, you will be paying a fixed interest rate of 2.6%

3. Lock-in Period

Banks impose a lock-in period, usually between two to three years. It is the period in which you’ll pay a prepayment penalty if you decide to pay your loan earlier. During this lock-in period, your interest rate won’t change between the offer and closing as long as there are no changes in your application such as your loan amount.

Bank Loan vs HDB Loan: Which Should You Choose?

Choose a bank loan if you want lesser restrictions in terms of income ceiling and citizenship requirements or plan to purchase a private property instead of an HDB flat. 

Choose an HDB loan if you want a fixed rate over the whole loan duration. HDB loans have lower interest rates and bank interest loans may tend to fluctuate faster. The property market is back on the rise and the low-interest rates caused by the pandemic era are far from coming back.

wooden house shopping cart key

Other Important Things To Know

1. Can I use CPF to Pay for Bank Loans or HDB Loans?

Yes. For bank loans you need to pay the required 25% downpayment, 5% in cash and the remaining 20% may be paid through your CPF Ordinary Account. For HDB loans, you may use your CPF to pay for the required 10% downpayment.

2. Do I Need to get Fire Insurance if I Choose a Bank Loan?

Yes. Fire insurance is mandatory when taking a home mortgage loan from a bank. The only bank that is exempted from this is OCBC.

3. Can I Make Early Repayments?

Yes. There are no prepayment penalties on HDB loans and you can pay your loans early. You can do so also with banks, however, you will be charged with an early repayment penalty.

Read Also: COV Singapore


Your choice will depends on what makes most sense according to your long-term financial plans and current situation. Ultimately, the goal is to benefit most from the option and achieve your goal of making an affordable purchase.

Key Takeaways

  • If you don’t meet the criteria on HDB loans, you are left with a home loan option from banks.
  • Choose a bank loan if you plan to purchase a private property instead of an HDB flat.
  • Choose an HDB loan if you want a fixed rate over the whole loan duration.

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