What is the difference between a HDB loan and bank loan?
Last updated: 12 Oct 2026
When you buy an HDB flat, you can finance it with either an HDB housing loan or a bank loan. Both can get you the keys, but they work very differently. Here's what you need to know.
Quick Comparison
| HDB Loan | Bank Loan | |
|---|---|---|
| Interest rate | 2.6% p.a. (0.1% above the CPF OA rate) | Fixed or floating (SORA-pegged), varies by bank and market |
| Rate stability | Stable, revised quarterly but rarely changes | Can rise or fall with the market |
| Loan-to-Value (LTV) | Up to 75% | Up to 75% |
| Downpayment | 25%, can be fully paid with CPF | 25%, at least 5% must be in cash |
| Eligibility | Income ceilings and HDB Loan Eligibility (HLE) letter required | No income ceiling, subject to bank's credit assessment |
| Lock-in period | None | Usually 2 to 3 years |
| Early repayment penalty | None | Usually applies during lock-in |
| Late payment | More lenient | Late fees and stricter terms |
| Refinancing | Can switch to a bank loan anytime | Cannot switch back to an HDB loan |
HDB Loan: Pros and Cons
Pros
- Predictable 2.6% rate, so you know what to expect
- No cash needed for the downpayment
- No lock-in and no penalties for early repayment
- More flexible if you run into financial difficulty
Cons
- Usually higher than bank rates
- Income ceilings and eligibility rules apply
- Limited to two HDB concessionary loans in your lifetime
Bank Loan: Pros and Cons
Pros
- Often cheaper than 2.6% when market rates are low
- No income ceiling
- Wide choice of packages (fixed, floating, hybrid) and perks
Cons
- Rates go up after the lock-in period ends, requires monitoring.
- At least 5% of the downpayment must be in cash
- Lock-in periods and early repayment penalties
- Once you switch, there's no going back to an HDB loan
Which One Should You Choose?
An HDB loan may suit you if you:
- Prefer stability and predictable monthly payments
- Don't have much cash for the downpayment
- Want flexibility to repay early without penalties
A bank loan may suit you if you:
- Want to take advantage of lower market rates
- Are comfortable with some rate movement
- Plan to review and refinance every few years to stay on a good rate
The Key Thing to Remember
Switching from an HDB loan to a bank loan is a one-way move. Before you switch, compare packages carefully and make sure the savings are worth giving up the HDB loan's safety net.
Not Sure Which Is Right for You?
Cashew compares 500+ mortgage packages across banks and shows you how they stack up against your HDB loan, side by side. Our mortgage consultants can help you work out whether switching makes sense for you, at no cost.