What is the difference between an HDB loan and a bank loan?

The two main sources of financing for property purchases in Singapore are HDB loans and bank loans. Each comes with distinct features, eligibility criteria, and trade-offs.

HDB loans are exclusively for the purchase of HDB flats, and at least one applicant in the household must be a Singapore Citizen. Households consisting entirely of Permanent Residents are not eligible. There is also a household income ceiling - currently $14,000 per month for families. HDB loans offer a concessionary interest rate of 2.6% per annum, pegged at 0.1% above the CPF Ordinary Account rate, which has remained stable over the years.

Bank loans are available for all residential property types - HDB flats, Executive Condominiums, private condominiums, and landed properties. Interest rates are benchmarked to SORA and can be lower than the HDB rate during periods of low interest rates, but are subject to market fluctuations. Banks offer both fixed and floating rate packages.

Both loan types are capped at 75% LTV following the August 2024 cooling measures, meaning both require a 25% downpayment. The key difference is flexibility: HDB loan borrowers can pay the entire downpayment using CPF with no mandatory cash component, while bank loan borrowers must pay at least 5% of the purchase price in cash.

On early repayment, HDB loans carry no penalties - you can pay off your loan early at any time. Bank loans typically have a lock-in period of two to five years, during which early repayment attracts a penalty of around 0.75% to 1.5% of the outstanding loan amount.

In short, HDB loans offer stability and flexibility, while bank loans may offer lower rates but come with more variability and stricter cash requirements.