Home Loans

3 Key Factors to Consider Before Buying a HDB Flat

Purchasing a HDB flat is a significant milestone for many. However, searching for your dream house comes with many considerations as it is likely a long term investment for you. Read ahead to discover what you should evaluate before buying your first HDB flat.

Are you ready to buy your first HDB flat? Buying a HDB flat is a life accomplishment for many. This pivotal moment marks the start of adulthood for many Singaporeans. Undoubtedly, the process of buying a house can be daunting. From finding your ideal location to one that is within your budget, there are many factors to assess.

With a mound of factors to consider, making a decision may seem overwhelming, but fret not -- we have come up with three key considerations to guide you through the process of purchasing your dream house.

HDB pavilion amenities

1. Location and Amenities

Singapore has three different regions -- Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR). Due to locality and prestige, each region has different housing prices. For example, the real estate market will be more competitive in popular districts such as District 9, 10, and 11.

Singapore digital map
Image: Screengrab from Google Map

Homebuyers tend to pay more for housing in these districts. Hence, when choosing your ideal location, you should consider the district it is located in to fit your budget.

For example, with a S$500,000 budget, you could purchase a 5-room flat in Woodlands. However, you would probably get an old 3-room flat with the same budget at a more prestigious location like Balestier or Tiong Bahru instead.

Apart from home districts, there are two other factors that can help narrow down your options -- HDB's proximity grant and the Prime Location Housing (PLH) model.

Firstly, if you intend to buy a resale flat, you might want to pick a location within 4 km of your parents' house. You will be entitled to a S$20,000 HDB proximity grant. To check if you qualify for this grant, you can use the Distance Enquiry for Proximity Housing Grant calculator.

Secondly, if you plan to purchase a BTO flat in a prime location, the latest announcement of the PLH Model will affect you. Some key features of this new model include a longer minimum occupation period, tighter rental conditions, priority allocation quota for Married Child Priority Scheme (MCPS) and more.

Therefore, these two factors are worth considering when deciding which location to purchase your HDB flat as they have a significant impact on the value and cost of your house. After you have narrowed down a few locations, you should also survey the neighbourhoods before making your final decision.

If public transport is your regular mode of transport, you might want to find a flat close to a bus stop or MRT station. On the other hand, finding a flat near an expressway would be more convenient if you drive daily. You should also consider amenities such as coffee shops, supermarkets, malls, hospitals, playgrounds, schools and hawkers.

man holding money in hand

2. Financing Your Flat in Singapore (HDB Loan vs Bank Loan)

For most Singaporeans, home financing is a necessity. Buying a home is one of the greatest financial commitments you will ever make. Hence, you must pick a home loan that is right for you. You can either opt for a HDB loan or a bank loan when you buy a HDB flat. But what are some differences between these two types of housing loans in Singapore?

HDB Loan

If you opt for a HDB loan, you are looking at an interest rate of 2.6%. The Housing & Development Board offers housing loans with a concessionary interest rate pegged at 0.1% above the CPF Ordinary Account (OA) interest rate. This rate, however, is not as competitive as many other bank loans. Despite the high-interest rate, there are still some noteworthy features of HDB loans. Firstly, HDB loans have a higher loan-to-value (LTV) limit of 90%. Secondly, the required down payment can be paid using CPF, housing grants or cash. Lastly, if you want to repay your HDB loan sooner, you can do so without a penalty fee.

HDB Housing Loan Eligibility Summary

  • HDB loans are only applicable for the purchase of HDB flats
  • At least one buyer must be a Singapore citizen
  • Family's monthly income must not exceed $14,000 ($21,000 for extended families)
  • Buyers must not own any private residence
  • Must dispose of private residential property more than 30 months before the HDB loan application
  • Buyers are only eligible for 2 HDB Home loans in lifetime in Singapore (may not apply for a 3rd)

Bank Loan

Bank loans are a more affordable and flexible option. What are some key features that make bank loans stand out? Firstly, there are fewer eligibility requirements. While HDB loans require one buyer to be a Singaporean, bank loans do not. Secondly, bank loans offer a more competitive rate. This means that borrowing is cheaper for buyers. In Singapore, the average rate for a bank loan is between 1.2% to 1.5%. Moreover, borrowers can also refinance their loans at more competitive rates every few years.

Home Mortgage Loan Calculator (Singapore)

To get a better understanding of how much a bank loan will cost, you can use the home loan tool below. This mortgage calculator uses live interest rates that are currently available in Singapore. This is critical due to the fact that bank's home loan rates tend to fluctuate often.

Find the Cheapest Home Loans in Singapore

{"defaultValue":"500000","clearOnFocus":true,"label":"Loan Amount","name":"loanAmount","symbol":"$","symbolLocation":"left","showLabel":false}

Key Differences Between HDB Loan and Bank Loan

HDB LoanBank Loan
Down Payment10% of purchase price (Can be paid in full using CPF’s Ordinary Account)25% of purchase price (At least 5% must be paid in cash)
Interest Rate2.6% (0.1% above the prevailing OA interest rate)Lower than HDB loan interest rate (Dependent on market conditions)
Lock-in PeriodNo penalty for early repaymentMost banks have an average lock in period of two to three years. Early repayment would usually incur a penalty that is usually 1.5% of the loan amount.
home renovation

3. Renovating Your Flat (Renovation Loans)

Remodelling your home to make it your dream home is one of the most exciting parts of buying a flat. Fancy a luxury contemporary interior design style? Or do you prefer a more traditional interior design style? The best part of owning a home is that you can renovate it to your liking. However, renovations can be pricey. To ease your financial burden, you might want to opt for a home renovation loan.

Renovation Loans in Singapore

1. Maybank Renovation Loan
Consider this if you require a large renovation loan and will apply online
  • Maximum Principal
    • 6x Monthly Income or S$30,000
    • Rest Rate
      • 6.53%
      • Cashier Fee
        • 1st free, S$5/each after deducted from loan proceeds

        MaturityProcessing FeeInterest Rate (Rest Rate)Monthly InstalmentTotal Cost
        1 Year0.75%4.30%S$1,279S$464
        2 Years0.75%4.30%S$653S$794
        3 Years0.75%4.30%S$445S$1,128
        4 Years0.75%4.20%S$340S$1,434
        5 Years0.75%4.20%S$278S$1,769
        *Assuming loan of S$15,000
        Maybank’s competitive interest rates and low fee (0.75%) make it a good option for those that seek a larger renovation loan. First, Maybank's interest rate of 4.2% is among the lowest available for loans of 4-5 years, making it a good fit for larger loans. The bank also offers dramatically lower rates if you already have a home loan with Maybank in Singapore. For existing home loan customers, Maybank will reduce the interest rates from 4.2% and 4.3% to 2.88%, which is the lowest in the market.

        2. HSBC Personal Loan
        Consider this if you seek the best personal loan rates for your large renovation project
        • Eligibility
          • S$30,000 of annual income
          • Max. Loan Amount
            • 4x monthly salary for income S$30,000 to S$120,000; 8x monthly salary for income > S$120,000; S$200,000 Maximum Loan Size (2x monthly salary for foreigners)
            • Min. Loan Amount
              • S$10,000
              • Processing Fee
                • S$0
                • Approval Time
                  • 1 minute approval, receive cash in one business day

                  Loan DurationFlat RateProcessing FeeEffective Interest RateMonthly InstalmentTotal Cost
                  1 year3.8%S$07%S$865.00S$272
                  2 years3.7%S$07%S$447.50S$632
                  3 years3.7%S$07%S$308.61S$1,002
                  4 years3.7%S$07%S$239.17S$1,372
                  5 years3.8%S$07%S$198.33S$1,792
                  6 years3.8%S$07%S$170.56S$2,172
                  7 years3.8%S$07%S$150.71S$2,552
                  *Assuming S$10,000 loan and income of S$30,000; includes processing waiver & online cashback
                  HSBC offers the most affordable personal loans for most consumers. For instance, the bank's effective interest rate of 7% p.a. is the best available. Additionally, the bank tends to offer competitive promotions. The bank is also ideal for those that need a large loan for their renovation project because it is the only bank to offer 7-year loans. This assists homeowners that prefer to spread out the total cost of their loan over several years. Finally, HSBC is a great option for expats and other foreigners residing in Singapore, as its income requirement for these consumers is lower than those of other banks (S$40,000).

                  3. Friday Finance
                  Consider this if if you have bad credit and want a short-term, flexible renovation loan
                  • Eligibility
                    • No min. salary; Must be SG citizen or PR who is either a Salaried Employee, Variable/Commission-based Employee or Self Employed
                    • Max. Loan Amount
                      • 6x monthly salary
                      • Processing Fee
                        • Starting from 2%; 50% refund if loan is paid off on time
                        • Approval Time
                          • 1 day

                          No promotions currently offered
                          TenureInterest RateAdmin FeeMonthly Repayment AmountTotal Cost
                          3 Months2%S$600S$5,201.32S$603.96
                          6 Months2%S$600S$2,677.89S$1,067.34
                          9 Months2%S$600S$1,837.73S$1,539.57
                          12 Months2%S$600S$1,418.39S$2,020.68
                          18 Months2%S$600S$1,000.53S$3,009.54
                          *Assuming loan of S$15,000
                          Friday Finance is a moneylender that provides personal loans that you can use for renovations, even if you have bad credit or low income. These loans are a good option for people who want to take out a short-term loan, as the max tenure is 18 months. Customers will pay between 1-3% in interest per month, depending on their specific circumstances. However, banks typically charge 3-6% annually, so they would be a better option for long-term renovation loans. Customers who earn more than S$20,000 a year can take a loan out of up to 6x their monthly income, otherwise you have a loan cap of S$3,000. These renovation loans can be either secured or unsecured, with the latter being covered by their insurance policy at no cost to you. This means that your loan obligation will be reduced if you cannot pay back the loan due to an accident that resulted in your permanent/temporary disability or death. Furthermore, if you repay your loan on time, Friday Finance will refund you 50% of the administration fee.
                          HDB flat singapore corridor

                          Plan For Your Dream Home Today

                          Buying a home is one of the most momentous decisions you will ever make in your lifetime. To recap, the three key factors to consider when buying a HDB flat in Singapore are location, renovation loans as well as housing and mortgage loans.

                          Do remember to do your own research so that you have a clear understanding of all your available options. Kickstart your home buying process and turn your dreams into reality today!

                          Tan Boon Hun

                          Boon Hun spent over five years in the content marketing space as the managing editor of Goody Feed creating interesting and relevant content for the social media generation. In 2022, he moved to the FinTech space while remaining true to his roots, intending to bring financial literacy to more people in Singapore. When not doing his work, he can be found watching people build homes on YouTube.

                          {"endpoint":"\/newsletter\/subscribe","style":"blue","title":"Keep up with our news and analysis.","version":"sidebar"}