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HDB Loan Vs Bank Loan: Which Home Loan Should You Choose?

woman's giving house key after choosing which loan to apply hdb loan or bank loan

Buying a home may be one of the biggest decisions we take in our adult life. Aside from probably being our biggest purchase, homes are where we will create our life and even the lives of our children. It is only logical that we try to make all our home-related decisions free from any mistake.

In this article, you will learn about buying a home, particularly through home financing. We will discuss the two best options when purchasing a home, an HDB loan, and a bank loan. Learn the difference between the two and identify which of them is right for you.

HDB Loan

What is an HDB loan?

HDB concessionary loans are given out to Singaporeans who wish to own an HDB flat. It is given by the Housing and Development Board (HDB). Note that this loan is only applicable to those who wish to buy a private residence. Today, an HDB loan interest rate is 2.6%.

Who can apply for an HDB loan?

While HDB loans are undeniably great deals, not everyone can actually get one. Here is an overview of eligibility conditions. You can read more of the details here.

  • Must be planning to get HDB flats
  • At least one of the buyers must be a Singapore Citizen
  • Must be at least 21 years old
  • The monthly income of the home buyer must not exceed $12,000 or $18,000 for extended families
  • Must not own any private residence both in Singapore or overseas
  • Must not have made more than 2 previous home loans from HDB
  • Must not have sold or disposed of private residential property in the last 30 months preceding the loan application

Pros and cons

Here are the advantages of choosing HDB loans.

  1. Reasonable interest rates. HDB loans have an interest rate of 2.6% per year, which is 0.1% higher than the prevailing CPF Ordinary Account (CPF OA). Another good thing is that this interest rate can be revised from time to time depending on the revisions of CPF interest rates.
  2. Smaller down payment. If you have taken an HDB concessionary loan, you only get to pay a down payment of up to 10% of the purchase price. You can pay this down payment using your CPF Ordinary Account. If you happen to have a lot of savings in your CPF OA account, it would mean having more cash to spend on other expenses like buying furniture and renovating.
  3. Can be easily changed to a bank loan. HDB Loans do not have a lock-in period, which means that you can switch your HDB loan to a bank loan any time you want. Some borrowers in Singapore would take an HDB loan and then a few years later take a refinancing with a bank to avail a lower interest.
  4. No penalty for early repayment. Unlike banks or other financial institutions, you can pay your HDB loan early and not incur an early repayment penalty. This is good news for individuals who wish to have more control over their finances.

Meanwhile, here are the disadvantages of choosing HDB loans.

  1. Higher interest rates than banks. While you might find the interest rate of an HDB loan reasonable, there is a chance that you will find a bank offering a lower loan interest rate. Banks often choose to set their interest rate based on the SIBOR rate or Singapore Interbank Offered Rate or fixed deposit home rate, which means that sometimes, bank’s loan interest rates may be higher or lower.

Bank loan

What is a bank loan?

Aside from taking an HDB loan, you can also apply to banks for a home loan. Banks are financial institutions regulated by the Monetary Authority of Singapore (MAS). Housing loans from banks can come in many forms like a fixed rate package, floating rate package, or a combination of the two. Take note that if you choose to take a housing loan from a bank, you will no longer be allowed to refinance your flat with an HDB loan.

Who can apply for a bank loan?

Much like HDB loans, bank loans have certain eligibility requirements. Note that each bank has its own requirements. Most banks require that:

  • Must be 21 years old
  • At least one of the applicants must earn more than $36,000
  • The minimum loan amount should be $100,000

Additionally, applying for a bank loan requires several documents. These documents are meant to prove that you are capable of paying your debt to these private financial institutions. These documents include:

  • Photocopy of NRIC
  • Option to Purchase or Sale & Purchase Agreement for a new purchase
  • Loan statement from an existing bank or financial institution in the last 12 months for those looking for refinancing
  • Latest CPF Withdrawal State for a property to be refinanced or sold
  • Latest Tax Assessment and CPF Statement for salaried employees

Pros and cons

Here are the advantages of taking bank home loans:

  1. Lower interest rates. There is a chance that you can find an interest rate lower than an HDB loan. Also, some banks offer better customer service.
  2. Easier eligibility requirements. HDB loans cater to individuals who are finding affordable loan packages. You will have to submit a lot of requirements to prove that you deserve an HDB loan. For families who have a high household income, taking a bank home loan is the better choice.

Meanwhile, here are the disadvantages of taking a loan from a bank.

  1. There is a prepayment penalty. Banks have a lock-in period, which means that you cannot settle your loan until the date indicated in the agreement. If you choose to accomplish your loan repayment before this date, banks would usually ask you to pay a prepayment penalty.
  2. Interest rates fluctuate. Unlike HDB loans, where they have a fixed rate, banks have a fluctuating interest rate. They base their interest rate on SIBOR rate and fixed deposit home rate, which means that sometimes you can find a higher interest rate while, in some cases, lower loan packages.

HDB Vs Bank Loan

HDB Loan Bank Loan
Interest rate 2.6% Around 1.3% to 1.7% which will increase in the 3 years or so
Amount of repayment Consistent loan repayment rates because of stable interest rates Inconsistent because of the interest rate. May change in the next 2 or 3 years
Loan to Value (LTV) limit 90% Around 75%
Down payments 10% of the purchase price which can be paid using CPF Ordinary Account (OA) 5% must be paid in cash, 20% can either be paid in cash or by CPF OA
Early repayment No fee 1.5% penalty fee
Late repayment Friendlier – 7.5% late payment fee each year Less friendly – $50 late payment fee for each late repayment

In summary:

  • HDB loan is ideal if you do not have enough cash to pay as a down payment. Also, it is for those who want to borrow a higher loan amount. It is for individuals looking for a more consistent loan repayment scheme and a friendlier loan tenure.
  • A bank loan is ideal if you can find a bank with a more competitive interest rate and better loan packages. Also, it is for individuals who value customer service. Bank loan rates are known to fluctuate, which means that you can be strategic when applying for a home loan.
  • HDB loans are for people who want certainty and stability when it comes to the interest they are paying and the repayment plan. On the other hand, bank loans are for risk-takers who believe that they can find a bank with lower interest rates and more competitive loan packages.

Three Considerations to Help You Decide

When deciding between HDB loans vs bank loans, you should not only look at the rates offered by these financial institutions. Instead, you must also reflect on your current and future financial status to know which of these two works better for you. Remember that your decision relating to home loans will affect you in years to come.

1. Do you have enough savings?

There are more expenses required by bank loans. There are fees which must be paid before applying, which includes:

  • Legal fees to process your loan
  • Administration or legal fees to refinance
  • Home insurance payments which may be more expensive than in HB loans
  • Late repayment fees
  • Early repayment fees

2. Can you take the risk?

As mentioned above, a bank housing loan can give you a lower interest rate. If you know how to play your card right, you can use the money you save into better things. For example, investors can use the money they save on a business venture or on another project that earns.

Meanwhile, those who are more financially conservative would appreciate an HDB loan better. The steady rates of HDB loans are a better choice for those who do want risks. They say that they have better control over their finances with HDB loans.

3. Do you have a steady income?

Both bank loans and HDB loans charge late repayment fees. But, if you choose to borrow from a bank, you will have to pay more for each late repayment. Hence, if you do not have a steady income and are likely to repay your monthly loan amount late, an HDB loan might be better for you.


Truly, there is so much to consider in choosing between an HDB loan vs bank loan. Clients have to consider factors like interest rates, loan to value, down payment, and many more in making their decision. But there is one thing you need to remember in choosing between HDB loans and bank loans; it depends on your personal financial status. You have to assess your own finances then choose whether an HDB loan or a bank loan is better for you.

Whichever you choose in your home loan, know that Bugis Credit is willing to help you to pay emergency and unexpected bills through the best personal loan. Bugis is a licensed money lender in Singapore and has a fast and easy loan application process, which is perfect for those who are in need of fast cash.

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