HDB Loan Vs Bank Loan – Which One is Better for You?

Written by Shannon Wong on March 23, 2023

Buying an HDB flat in Singapore is a big financial decision, and choosing the right type of housing loan is crucial. The two main options available are HDB loans and bank loans, but which one is right for you? Until recently, bank loans were a popular choice due to their low-interest rates, making them more cost-effective than HDB loans.

However, with interest rates rising in 2022, HDB loans are now becoming a more favourable option, with a stable 2.6% interest rate. In this article, we will comprehensively compare HDB loan vs bank loan, exploring the pros, cons, and everything in between. Whether you’re a first-time homebuyer or a seasoned investor, our goal is to help you make the best financial decision for your needs.

HDB Loan Vs Bank Loan

HDB loan is a government-supported loan specifically designed for individuals looking to purchase a flat from the Housing & Development Board (HDB) in Singapore. The HDB loan is a popular choice among homebuyers as it provides a more affordable financing option and helps to make homeownership more accessible.

On the other hand, bank loan is a loan offered by commercial banks and financial institutions to finance the purchase of a property or to meet other financial needs. Bank Loans are a flexible financing option and are widely available in Singapore. They offer a wider range of loan products and give the borrower greater flexibility regarding repayment tenures and loan quantum.

To further help you decide between these prominent loans in Singapore, the following is the table that provides some valuable comparison of HDB loan vs bank loan:

Loan TypeHDB Housing LoanBank Loan
DescriptionA home loan from the Housing & Development Board (HDB) for the purchase of HDB flats.Home loans from banks in Singapore, e.g. DBS, UOB, etc, for the purchase of both HDB flats and private properties.
Borrower EligibilitySeveral requirements are in placeGood credit score required, no income capping
Property EligibilityHDB flats onlyBoth HDB and private properties
Minimum Loan SizeNone$100,000 or more
LTV Limit80%75%
Downpayment20% (can use CPF), with a $5,000 deposit for resale flats25% (5% in cash, 20% can use CPF)
Interest Rates2.6% pegged at CPF interest rate2.7% (floating), 3.45% (fixed)
Types of Packages1 typeFloating, fixed, hybrid
Loan Tenure25 years30 years
Penalty (Early Repayment)NoneBetween 1.5% and 1.75%
Penalty (Late Repayment)7.5% (negotiable)Not as lenient as HDB

Pros And Cons

The debate of HBD loan Vs Bank Loan could only be completed by stating the pros and cons of each loan type.

HBD Loans Pros

  • Lower interest rates than bank loans: HDB loans typically offer lower interest rates, making them more affordable for borrowers.
  • More flexible repayment options: HDB loans offer a range of repayment options to suit the financial needs of different borrowers.
  • No early repayment penalties: HDB loans do not have any penalties for early repayment, allowing borrowers to pay off their loans sooner if they choose to.
  • No minimum amount requirement: HDB loans do not have a minimum amount requirement, making them accessible to those who need smaller loans.
  • Suitable for first-time homebuyers: HDB loans are specifically designed to help first-time homebuyers purchase their first property.

HBD Loans Cons:

  • Limited availability, not all properties are eligible: HDB loans are only available for certain properties, which may limit the options for some borrowers.
  • Strict eligibility criteria, such as income and age restrictions: HDB loans have strict eligibility criteria, including income and age restrictions, which may prevent some borrowers from qualifying.
  • Longer processing time: The processing time for HDB loans may be longer compared to bank loans, which can be a drawback for those in a hurry.
  • Higher risk for default: HDB loans carry a higher risk for default than bank loans, which could be a concern for some borrowers.

Bank Loans Pros:

  • More widely available: Bank loans are widely available and can be used to finance a wide range of properties.
  • Suitable for larger loan amounts: Bank loans can be used to finance larger loan amounts, making them suitable for those who need larger loans.
  • Faster processing time: Bank loans have a faster processing time than HDB loans, which can be a big advantage for those in a hurry.
  • Wide range of repayment options: Bank loans offer a wide range of repayment options, making them suitable for various financial needs.

Bank Loan Cons:

  • Higher interest rates than HDB loans: Bank loans typically have higher interest rates than HBD loans, making them less affordable for some borrowers.
  • Constant refinancing or repricing fee: Bank loans may have a constant refinancing or repricing fee, which can increase the overall cost of the loan.
  • Early repayment penalties: Bank loans may have early repayment penalties, which can make it more expensive to pay off the loan early.
  • Higher downpayment requirement: Bank loans may have a higher downpayment requirement than HBD loans, which can be a drawback for some borrowers.
  • Minimum amount requirement: Bank loans may have a minimum requirement, making them inaccessible to those needing smaller loans.


The Total Debt Servicing Ratio (TDSR) is a restriction imposed on all home buyers to ensure that the monthly repayments for all liabilities, including housing loans, do not exceed 55% of their monthly income.

  • The TDSR restriction was revised from 60% to 55% in December 2021.
  • The interest rate floor used for TDSR computation was increased by 0.5% in September 2022.
  • The TDSR applies to all liabilities, not just housing loans, meaning that existing liabilities may impact an individual’s ability to take out a housing loan.

The Mortgage Servicing Ratio (MSR) is a restriction for those purchasing HDB properties, including executive condominiums, which states that monthly repayments for a mortgage cannot exceed 30% of the borrower’s and joint borrower’s monthly income.

  • The MSR applies specifically to HDB property purchases, including executive condominiums.
  • The interest floor rate for MSR computation was increased by 0.5% in September 2022.
  • The MSR is designed to ensure that the monthly repayments for a mortgage are affordable for the borrower and joint borrower.

Key Considerations for A HDB Loan Vs Bank Loan

Key Considerations for an HDB Loan:

  • Eligibility criteria: HDB loans have strict eligibility criteria, such as age and income restrictions, that must be met to qualify for a loan.
  • Availability: HDB loans are not available for all properties, so it is important to check if a property is eligible before applying.
  • Interest rates: HDB loans typically have lower interest rates than bank loans.
  • Repayment options: HDB loans offer more flexible repayment options, but there is a higher risk of default.
  • Processing time: HDB loans have a longer processing time than bank loans.

Key Considerations for a Bank Loan:

  • Interest rates: Bank loans typically have higher rates than HDB loans.
  • Refinancing or repricing fee: There may be constant fees associated with bank loans.
  • Early repayment penalties: Bank loans may have early repayment penalties.
  • Downpayment requirement: Bank loans often require a higher downpayment than HDB loans.
  • Availability: Bank loans are more widely available and suitable for larger loan amounts.

Eligibility Criteria for A HDB Loan and Bank Loan

Eligibility Criteria for an HDB Loan:

  • Age restrictions: Borrowers must be 21 years old and above at the time of application.
  • Income restrictions: Borrowers must meet HDB’s income ceiling to qualify for a loan.
  • Property eligibility: Not all properties are eligible for HDB loans.
  • Other factors: Other factors such as credit history and debt obligations may also be considered.

Eligibility Criteria for a Bank Loan:

  • Income requirements: Borrowers must have a stable income to qualify for a bank loan.
  • Credit history: A good credit history is important for eligibility for a bank loan.
  • Collateral: Some bank loans may require collateral.

Other factors such as debt-to-income ratio, employment history, and other liabilities may also be considered.

HDB Loan Vs Bank Loan – Which One You Should Apply?

The decision to apply for an HBD loan or a bank loan ultimately depends on the borrower’s financial situation and the purpose of the loan.

For example, an HDB loan may be the better option for first-time homebuyers with lower incomes due to its lower interest rates and more flexible repayment options.

On the other hand, if the loan amount is larger, a bank loan may be a better option as it offers a wider range of repayment options and is more widely available.

Ultimately, the choice between an HBD loan and a bank loan will come down to the borrower’s specific financial situation and needs. For expert guidance and assistance in finding the right loan, look no further than 1AP Capital.

Our loan specialists will work with you to determine the best loan option for your needs and help you through the entire loan process. So contact us now to apply for the loan now and get started on securing your financial future.

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