Home Loan Basics: Bank Loans vs HDB Loans

Purchasing a home is the most significant investment many families will make in their lifetimes. Therefore, it is important to have a clear understanding of all the options available when choosing between home loans. Aside from comparing rates from different banks, consumers must also navigate the differences between bank loans and HDB loans. This guide serves to lay out the differences between the two and allow homeowners to make more informed decisions.

Table of Contents

HDB Loans

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 is currently 2.6%, which is less competitive than those of many bank loans. however, there are some features of HDB loans that make them worth considering.

Pros and Cons of HDB Mortgage Loans

There are a few notable benefits of HDB home loans. First of all, these mortgages allow homebuyers to put less money down due to the higher loan-to-value (LTV) limit of 90% (banks are only allowed to lend up to 75% of the home's value). For instance, those using a HDB home loan are only required to put down S$30,000 for a S$300,000 home (S$270,000 loan), while bank loan customers must put down S$75,000 (S$225,000 loan). Additionally, the downpayment for a home purchased with an HDB loan can comprise of CPF, Housing Grants or cash. On the other hand, those purchasing a home with a bank mortgage must pay at least 5% of the home's value in cash as part of the down payment. Finally, HDB loans allow for early repayment without fees, whereas many banks charge a penalty (usually about 1-2%) for early loan repayment.

However, there are also some downsides to HDB housing loans. For example, unlike bank loans, HDB loans cannot be used to purchase private residences. Additionally, the best home loan rates are currently lower than HDB's rate. This means that borrowers stand to save thousands of dollars by obtaining a competitive mortgage rate from banks. To estimate the total cost of your home loan options, use our home loan calculator tool.

HDB Loan Eligibility

In order to be eligible for a HDB mortgage, one home buyer must be a Singapore citizen. Additionally, these home loans are only issued to those purchasing HDB flats, meaning that they cannot be used to purchase condos or other private homes. Additionally, HDB loans are not offered to those that own private residences in Singapore or overseas or those who have sold a private residence within the last 30 months. Furthermore, buyers are not eligible if they've previously received 2 HDB loans.

In the event you are initially under a bank loan for a HDB purchase, you will not be allowed to refinance with a HDB loan.

HDB Loan Eligibility Summary

  • HDB loans 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 and $7,000 for singles)
  • 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 (may not apply for a 3rd)

The Housing & Development Board recently introduced new income limits for its housing loans. As shown in the table below, families are now able to access HDB housing loans provided that their monthly income does not exceed S$14,000, which is S$2,000 higher than the previous cap. Similarly, extended families that earn up to S$21,000 each month are eligible, a S$3,000 increase from the previous cap of S$18,000. Finally, individuals that are eligible to purchase a home through the Single Singapore Citizen (SSC) Scheme can obtain HDB housing loans provided that their income does not exceed S$7,000 per month. For applicants that have been employed for fewer than 3 months, the average income will be calculated based on the actual number of months worked.

HDB Housing Loan Average Gross Monthly Household Income Limits

Family TypeIncome Limit
Extended FamilyS$21,000

Single Singapore Citizen (SSC) Scheme: resale flat or a 2-room new flat in a non-mature estate

Bank Loans

Bank mortgage loans offer borrowers more affordable and more flexible loans compared to HDB home loans. Between more competitive rates and fewer eligibility requirements, these mortgages may be preferable to homeowners.

Pros and Cons of Bank Loans

In general, bank housing loans tend to offer much more flexibility compared to HDB home loans. First of all, there are fewer eligibility requirements. There are no income caps or citizenship requirements and borrowers can purchase HDB flats or private residences. One downside to bank loans is that MAS regulations limit loans to 75% of the home's sale price. For this reason, borrowers with bank home loans may have to make more significant down payments. Of course, homeowners that make larger down payments will pay less in interest costs compared to those that make smaller down payments (assuming the same sale price and interest rate) as they will be accruing interest on a smaller loan amount.

The most important difference between the two loan types is that home loans from banks tend to be less expensive than HDB loans. Because the current HDB concessionary rate is 2.6%, borrowers can save tens of thousands of dollars by choosing a more competitive rate from one of Singapore's top banks. While bank rates tend to change more frequently than the HDB concessionary interest rate, most banks allow borrowers to refinance at more competitive rates every few years. This can negate the benefit of a fixed HDB loan interest rate and is quite common in Singapore.

Home Loan Calculator

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 important due to the fact that bank's home loan rates tend to fluctuate often.

Find the Cheapest Home Loans in Singapore

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Bank Loan vs HDB Loan

Ultimately, prospective home buyers must decide which home lending option better suits their needs. For those that plan to purchase an HDB flat, meet the Housing & Development Board requirements and are unable to obtain a lower interest rate from a bank, HDB housing loans are a great fit. However, most other borrowers would be better off with a bank loan as these mortgages tend to cost significantly less over the course of the loan.

Home Loans: HDB Loan & Bank Home Loans Comparison

HDB LoanBank Loans
Interest Rates2.6%Typically lower than HDB interest rate
LTV Limit90%75%
Private ResidencesN/AAvailable

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Stephen Lee

Stephen Lee is a Senior Research Analyst at ValueChampion, specializing in insurance. He holds a Bachelor of Arts degree in International Studies from the University of Washington, and his prior work experience include risk management and underwriting for professional liability and specialty insurance at Victor Insurance. Additionally, Stephen is a former US Peace Corps Volunteer in Myanmar (serving between 2018-2020), where he continues to provide business development consulting services to HR companies in Asia Pacific.

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