Personal Finance

Should You Get A Bank Loan For Your HDB Flat?

November 10, 2022

So you’re ready to get your first home and you can’t wait to be a homeowner. But first, you have to think about how to finance it.

Do you take a HDB loan or bank loan for HDB flat? What is the difference and why should it matter?

Read on to find out all you should know about HDB and bank loans.

What To Know About A HDB Loan

You most likely already know what a bank loan is. It’s self-explanatory. But what you probably don’t know much about is the HDB loan.

So let’s take some time to talk about it and how to take a bank loan for HDB flats.

You already know HDB stands for Housing & Development Board. A HDB loan is a housing loan that is provided to help flat buyers finance their new homes.

You can take a housing loan from HDB or other financial institutions such as banks.

A HDB loan is only available to Singaporeans and its interest rate is currently 2.6%. To be eligible for this loan, you need to satisfy several conditions.

This is probably one of the most challenging parts of applying for this loan.

Should You Get A Bank Loan Or HDB Loan?

So, HDB loan vs bank loan – which is better? Unfortunately, there’s no one way to answer that question. Both loan options have their merits and demerits.

HDB loans have higher interest rates. There’s a 2.6% interest rate on HDB loans, which is significantly higher than the interest rate on bank loans, which typically starts from 1.2%.

However, the HDB interest rate is fixed. In contrast, bank interest rates normally increase after two to three years.

Also, the HDB loan-to-value (LTV) limit is 80% as of 30 Sep 2022, while the maximum bank loan for HDB is 75%.

The LTV ratio refers to how much you can borrow compared to the amount your home is worth. This means HDB loans allow you to borrow more compared to bank loans.

Clearly, both loan options have their pros and cons. In the end, it all comes down to your preference.


Key Differences Between A HDB Loan And Bank Loan 

Although HDB loans and bank loans have their pros and cons, you’ll find the one that suits you better if you think about a few factors carefully.

Let’s take a look at some of the key differences between them.

HDB Loans Allow You To Pay Your Downpayment Using Your CPF

When you take a HDB loan, you’ll need to pay a minimum downpayment of 20%. If you have adequate CPF savings, you can make this payment with your CPF Ordinary Account (OA).

However, bank loans are completely different. With a bank loan, you’ll need to make a downpayment of 25%, with 5% of that amount paid in cash.

Hence, HDB loans are certainly the better option in terms of the downpayment. Its rates are lower and you can pay using your CPF.

HDB Loans Have A Fixed Interest Rate

The HDB loan interest rate is fixed. This offers you consistency in repayments. However, bank loan interest rates may increase after two to three years.

HDB loans’ fixed interest rates allow you to plan your finances better. You’ll know exactly what you have to pay for the entire loan tenure.
But with bank loans, you never know how much you’ll have to pay as the interest is likely to increase in two years.

No Early Repayment Penalties On HDB Loans

Banks aren’t too thrilled when you pay off your loans within the lock-in period. These financial institutions rely on the interest you pay as their profits.

Hence, when you pay off your loans too early, it means they can’t make as much profit off you as they would have liked.

This is why you’ll have to pay a hefty penalty for repaying what you owe too early. But with HDB loans, you don’t have to pay any fee for early repayment.

HDB allows you to repay your loans early, which reduces the amount of interest you have to pay in the long run.

HDB Will Be More Lenient If You Default On Your Repayment

While we’d all love to pay back what we owe, the reality is that things don’t always go as we planned.

If you cannot repay your HDB loan, HDB is likely to be lenient and willing to give you more time to allow you to pay back what you owe.

However, banks aren’t so forgiving. There are serious consequences for defaulting on your bank loan repayments.

Bank Loans Have Fewer Restrictions

If you want to take a bank loan, the bank will probably just run a credit check and grant your loan request if you have good credit.

But for HDB loans, it’s a bit more complicated than that.

There are a lot of restrictions with HDB loans, and it may take you a while to read and understand the fine print.

With all those restrictions standing in your way, there’s a chance you may not be eligible for the loan. Hence, bank loans are easier to get.

Pros And Cons Of A HDB Loan And Bank Loan 

Below are the pros and cons of HDB and bank loans:

HDB Loans


  • Fixed interest
  • Higher LTV ratio (80%)
  • No early repayment fee
  • Can tolerate late repayment with only a 7.5% late payment fee per year
  • 20% downpayment can be paid with CPF
  • No minimum loan amount


  • Too many restrictions
  • 2.6% interest rate

Bank Loans


  • Eligibility only requires a credit check
  • 1.2-2.2% interest rate


  • Interest rate may increase after two years
  • Lower LTV ratio (75%)
  • Minimum $100,000 loan amount
  • Early repayment attracts a penalty
  • Bank loan for HDB downpayment is 25%, with 5% to be paid in cash

Eligibility Criteria For Each

To become eligible for a HDB loan, you must satisfy the following conditions:

  • You must not own a private residence in Singapore or overseas
  • You must be a Singapore citizen (if you’re applying as a family, at least one member of the family must be a Singaporean)
  • You cannot apply if you’ve taken more than two previous loans from HDB
  • Your monthly income cannot exceed $7,000 if you’re buying a small resale flat or a five-room flat under the Single Singapore Citizen (SSC). For families, their combined income should not exceed $14,000. The ceiling is $21,000 for extended families
  • Must not have owned or sold off property within the last 30 months before applying for a HDB loan

To be eligible for a bank loan, all you need is to have good credit. The bank will check your credit history and if it’s satisfactory, you’re most likely going to get the loan.

Why The TDSR And MSR Matter 

TDSR means Total Debt Servicing Ratio, while MSR means Mortgage Servicing Ratio.

The TDSR is a regulation that states that borrowers cannot spend more than 55% of their monthly gross income on total debt repayment.

Meanwhile, the MSR states that you can’t use more than 30% of your gross monthly salary to pay off your debt.

Before you’re granted a bank or HDB loan, either party will have to consider your TDSR and MSR to ensure you’re not borrowing too much money to finance a home.

This ensures that you don’t borrow what you can’t pay back.

Get The Loan That’s Right For You 

So bank loan or HDB, which one is better? Both options have their benefits, but it would appear that taking a HDB loan is far more beneficial.

However, if you don’t qualify for a HDB loan, you can still apply for a bank loan for HDB.

As for the question “should I pay off my HDB loan using CPF?” It’s all up to you.

Paying off your HDB with CPF means you don’t have to fork out a large sum of money from your pocket. However, it also means you have to pay accrued interest.

The alternative is paying with cash. This way, you don’t have to worry about accrued interest and you can keep some CPF funds for retirement.

If you’re looking to finance a new home in Singapore, HDB isn’t the only option.

There are licensed money lenders like GS Credit that can give you a personal loan to finance a new home.

Reach out to us today to apply for a loan and enjoy affordable interest rates.

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