HDB Loan or Bank Loan?
An HDB flat is the only home in Singapore with two ways to borrow: the HDB concessionary loan, fixed at 0.1% above the CPF Ordinary Account rate (2.6% today), or a bank loan at market rates.
- The HDB loan rate only moves if the CPF rate does. It has no lock-in and no prepayment penalty.
- Bank packages are usually cheaper during the lock-in, then reprice to a floating rate that can rise above 2.6%.
- The HDB loan has eligibility conditions (citizenship and an income ceiling); a bank loan does not.
Read the full comparison in HDB loan vs bank loan.
The 75% Loan Limit
Both the HDB loan and a bank loan on a first housing loan lend up to 75% of the price or valuation, whichever is lower. The other 25% is your down payment. What differs is how it can be paid:
- HDB loan: the full 25% can come from CPF, cash, or both.
- Bank loan: at least 5% must be cash; the remaining 20% can come from CPF.
A bank loan on an HDB flat is also capped by the 30% mortgage servicing ratio, so your monthly instalments cannot exceed 30% of your gross monthly income.
Using CPF for Your HDB Flat
- Your CPF Ordinary Account can pay the down payment (within the limits above) and the monthly instalments on either loan.
- Every dollar used is refunded to your CPF with accrued interest when you sell, which comes out of your sale proceeds.
- Paying instalments in cash keeps your CPF earning interest, which matters most for retirement planning.
When Switching from an HDB Loan to a Bank Loan Pays Off
Refinancing from an HDB loan to a bank loan is one way: you cannot return to an HDB loan later. It tends to pay off when:
- The bank rate is clearly below 2.6% for the whole lock-in, not only in year one.
- Your outstanding loan is large enough that the saving outweighs legal and valuation costs (many banks subsidise these).
- You can absorb a rate above 2.6% after the lock-in, or are prepared to refinance again.
Work out your own numbers on refinancing from an HDB loan to a bank loan.
When a Bank Loan Beats the HDB Loan
Buying a flat, rather than switching an existing loan, the choice comes down to rate, eligibility and how much certainty you want.
- The rate. Today the lowest bank rate for an HDB flat is 1.45%, against 2.6% on the HDB loan. A bank loan wins when its rate stays below 2.6% for the whole lock-in, and you are ready to refinance or reprice when the lock-in ends.
- Eligibility. The HDB loan has an income ceiling (S$14,000 a month for most families) and is only for citizen households. Above the ceiling, a bank loan is the only option.
- Cash for the down payment. A bank loan needs at least 5% of the price in cash; an HDB loan lets you pay the whole 25% from CPF. If your cash is tight, that can decide it.
- Certainty. The HDB loan has no lock-in, no prepayment penalty and a rate that only moves with the CPF rate. A bank loan is usually cheaper at first, but its rate can rise above 2.6% after the lock-in.
Both loans are capped by the 30% mortgage servicing ratio, so the most you can borrow is usually similar. See the full comparison in HDB loan vs bank loan.
Resale vs BTO: How the Loan Works
You need an HDB Flat Eligibility (HFE) letter before you book a BTO flat or buy a resale one, whichever loan you plan to take. If you choose a bank loan, get the bank's approval in principle early, as the 75% loan is only confirmed then.
BTO flats. You pay part of the down payment when you sign the Agreement for Lease and the rest at key collection. The loan itself only starts at key collection, often several years later, so the rate you see today is not the rate you will get. Bank packages for BTO flats are floating rate only; fixed packages become an option once you refinance after key collection.
Resale flats. The loan is drawn down at completion, usually about two months after you exercise the option to purchase, so today's rates are a good guide. Both fixed and floating packages are available. Banks lend on the lower of the price and the valuation, and any cash over valuation (the amount you pay above the valuation) must be paid in cash, not CPF.
