Introduction
For many Singaporeans, owning a home is a major life milestone. Whether you’re applying for a Build-To-Order (BTO) flat, a resale HDB, or even upgrading to an executive condominium, financing your home purchase is a crucial step. One of the most important decisions to make is whether to take up a HDB loan or a bank loan.
Both options have their own pros and cons, and the right choice depends on your personal financial situation, risk appetite, and long-term goals. In this comprehensive guide, we’ll break down the key differences between HDB loans and bank loans, analyze their benefits and drawbacks, and provide you with a clear framework to decide which mortgage solution best suits your needs.
What Is an HDB Loan?
An HDB loan is a government-backed mortgage facility provided by the Housing & Development Board. It is available only to eligible buyers purchasing HDB flats. The HDB loan is designed to offer affordable home financing for Singaporeans and comes with specific eligibility criteria and loan terms.
What Is a Bank Loan?
A bank loan is a mortgage facility provided by private financial institutions such as DBS, UOB, OCBC, Maybank, and other licensed banks in Singapore. Bank loans are available for all types of properties, including HDB flats, condominiums, and landed homes. Unlike HDB loans, bank loans offer a wider variety of packages with varying interest rates and terms.
Key Differences Between HDB Loans and Bank Loans
Let’s explore the most important differences between these two types of housing loans in Singapore.
1. Interest Rates
HDB Loan:
HDB loans have a fixed interest rate pegged at 0.1% above the CPF Ordinary Account (OA) interest rate, currently at 2.6% per annum (CPF OA rate of 2.5% + 0.1%).
Bank Loan:
Bank loans come with floating or fixed interest rates. Floating rates are tied to benchmarks such as SORA (Singapore Overnight Rate Average) and vary over time. As of 2025, many bank loans start at rates between 3.0% to 4.5%, depending on market conditions and the loan package chosen.
Comparison:
- HDB loans offer more stability due to their fixed nature.
- Bank loans may offer lower initial rates, especially during promotional periods, but are subject to fluctuation.
2. Downpayment Requirements
HDB Loan:
- Requires 10% downpayment, which can be paid entirely using CPF OA funds.
- No cash is required upfront if you have sufficient CPF savings.
Bank Loan:
- Requires minimum 25% downpayment.
- Of this, 5% must be in cash, and the remaining 20% can be paid using CPF OA.
Comparison:
- HDB loans are more accessible for buyers with limited cash savings.
- Bank loans require a higher upfront financial commitment.
3. Loan-to-Value (LTV) Ratio
HDB Loan:
- Up to 80% of the purchase price or market valuation, whichever is lower.
Bank Loan:
- Maximum of 75% loan-to-value.
Comparison:
- HDB loans offer a slightly higher LTV, meaning you can borrow more with less out-of-pocket expense.
- Bank loans are slightly more conservative in the amount you can borrow.
4. Flexibility of Loan Repayment
HDB Loan:
- HDB allows partial or full prepayment without penalties.
- Monthly repayments can be adjusted if your income changes.
- Allows borrowers to pay off the loan earlier with no fees.
Bank Loan:
- Usually comes with a lock-in period of 1 to 3 years.
- Early repayment or refinancing within the lock-in period may incur penalties (typically 1.5% of the outstanding loan).
- Legal subsidies might have to be clawed back if you refinance early.
Comparison:
- HDB loans are more flexible, especially for those who anticipate paying off their loans early.
- Bank loans are less forgiving due to lock-in periods and penalty clauses.
5. Eligibility Criteria
HDB Loan:
- At least one buyer must be a Singapore Citizen.
- Monthly income ceiling: $14,000 for families, $7,000 for singles buying under the Singles Scheme.
- Must not own any other residential property.
- Cannot have previously taken two or more HDB loans.
- No ownership of private residential property within the last 30 months.
Bank Loan:
- Open to Singaporeans, PRs, and foreigners.
- No income ceiling.
- Available for all types of properties.
Comparison:
- HDB loans have stricter eligibility requirements.
- Bank loans are more inclusive, especially for higher-income earners and property investors.
Pros and Cons of HDB Loans
Pros:
- Fixed interest rate provides stability.
- Lower downpayment (10%), fully payable with CPF.
- No penalty for early repayment.
- Government-backed, with lenient restructuring options if you face financial hardship.
Cons:
- Higher interest rate than some bank loans.
- Only available for HDB flats.
- Strict eligibility criteria.
Pros and Cons of Bank Loans
Pros:
- Lower initial interest rates (during promotional periods).
- Flexible packages: fixed, floating, or hybrid.
- Open to all buyers, including PRs and foreigners.
- Suitable for private property and refinancing.
Cons:
- Higher downpayment (minimum 5% in cash).
- Lock-in periods and prepayment penalties.
- Subject to interest rate fluctuations.
- Legal and valuation fees may apply.
When Should You Choose an HDB Loan?
An HDB loan is ideal if:
- You are a first-time buyer and meet HDB eligibility.
- You prefer predictable monthly repayments and a stable interest rate.
- You have limited cash and want to minimize upfront payment.
- You want the flexibility to repay early without penalties.
- You’re buying a BTO flat or resale HDB flat.
When Should You Choose a Bank Loan?
A bank loan is more suitable if:
- You are buying a private property or an executive condominium beyond the MOP.
- You are not eligible for an HDB loan due to income or ownership criteria.
- You want to take advantage of lower initial rates.
- You have sufficient cash and CPF to meet downpayment requirements.
- You are planning to sell or refinance in the next few years and are okay with some risk exposure.
Case Studies
Let’s look at two typical borrower profiles in Singapore to illustrate how the choice between HDB and bank loan may differ.
Case Study A: The Young Couple
- Both aged 30, combined monthly income of $9,000.
- Buying a 4-room BTO flat.
- Limited cash savings but have CPF OA balances of $100,000 combined.
Recommended Loan: HDB loan.
Why: They meet eligibility, can avoid cash downpayment, and benefit from predictable monthly instalments.
Case Study B: The Investor
- Age 40, owns a private condo, earning $15,000 monthly.
- Buying a resale HDB flat as a second property.
- Wants to secure lowest interest rates and plans to sell in 5 years.
Recommended Loan: Bank loan.
Why: Not eligible for HDB loan due to income and ownership. Also suitable due to short holding period and potential for refinancing.
Can You Switch from HDB Loan to Bank Loan?
Yes, many homeowners start with an HDB loan and refinance to a bank loan later to enjoy lower interest rates. However, once you switch from HDB to a bank loan, you cannot switch back to an HDB loan.
Timing is important. Many homeowners wait until they’ve built up sufficient savings or CPF before making the switch. Do note refinancing comes with legal and valuation fees, so the cost-benefit should be carefully calculated.
Factors to Consider When Making Your Choice
- Interest Rate Environment – Are rates expected to go up or down?
- Cash Flow – Do you have enough liquidity to handle higher downpayment?
- Income Stability – Are you in a stable job? Can you take on variable-rate risks?
- Long-Term Plans – Are you planning to upgrade, sell, or pay off early?
- Loan Flexibility – Do you prefer early repayment or long-term servicing?
Conclusion
The choice between an HDB loan and a bank loan in Singapore is not a one-size-fits-all decision. Each option offers unique benefits and drawbacks depending on your eligibility, financial profile, and future goals.
HDB loans provide stability, ease of entry, and government support—ideal for first-time buyers with limited resources. Bank loans offer lower interest rates (initially), more options, and are open to a wider group of property buyers, including those with higher incomes or private property interests.
Before making your decision, evaluate your current financial situation, long-term housing plans, and risk appetite. Better yet, speak to a qualified mortgage loan broker who can assess your profile and recommend the best option tailored to your circumstances.