Should You Get A HDB Loan or Bank Loan For HDB Flat?

Written by Shannon Wong on April 29, 2024

Key Takeaways

Choosing between a HDB loan or bank loan for a HDB flat hinges on individual financial circumstances. HDB loans offer a stable 2.6% interest rate and lower downpayments, suitable for those preferring predictability and meeting specific eligibility criteria. In contrast, bank loans might start with lower rates but are subject to fluctuations, appealing to those who can handle potential increases and meet stricter financial requirements.

When purchasing an HDB flat, one of the critical decisions to make is how to finance it.

Many potential homeowners face the dilemma of choosing between a Housing Development Board (HDB) loan and a bank loan. Both options come with their unique set of benefits and requirements, making the decision not just a matter of personal preference but one that requires a clear understanding of the nuances of each loan type.

This article aims to demystify the differences, advantages, and drawbacks of HDB and bank loans to help you make an informed choice.

Keep reading to determine whether to get a HDB loan or bank loan for HDB flat.

What to Know About HDB Loans

HDB loans are concessionary loans provided by the Singapore government, designed specifically for the purchase of HDB flats. These loans offer a stable interest rate, currently fixed at 2.6%, making them a predictable and secure option for many buyers.

However, there are several eligibility criteria and restrictions associated with HDB loans that potential borrowers must be aware of before applying.

Eligibility Criteria

To qualify for an HDB loan, applicants must meet several conditions:

  • At least one buyer must be a Singaporean citizen
  • Applicants must not own or have an interest in a private residential property both locally and overseas within the last 30 months
  • Applicants must not have sold a private residential property within the last 30 months
  • Your average gross monthly household income must not exceed:
  • $14,000 for families
  • $21,000 for extended families (refer to the guide for more details)
  • $7,000 for singles buying under the Single Singapore Citizen (SSC) Scheme

Advantages of HDB Loans

  • Fixed Interest Rate: The interest rate of 2.6% helps in financial planning as it remains constant throughout the loan tenure.
  • Lower Downpayment: Buyers can use their CPF Ordinary Account to pay up to 10% of the purchase price, reducing the upfront cash required.
  • No Prepayment Penalty: There is no penalty for early repayment of the loan, offering flexibility to borrowers who might come into extra funds and wish to clear their debt earlier.

Restrictions to Consider

  • HDB loans are restricted to the purchase of HDB flats only.
  • There is a limit on the number of times one can avail of an HDB loan.
  • Income ceilings apply, which could exclude higher earners from obtaining an HDB loan.

What to Know About Bank Loans

Unlike HDB loans, bank loans for HDB flats are offered by various financial institutions in Singapore. These loans can have more competitive interest rates, which may initially be lower than the HDB loan rates, but they are subject to change based on market conditions.

Eligibility and Application

The eligibility criteria for bank loans generally include:

  • A good credit score.
  • Stable income.
  • An assessment of the borrower’s financial history and creditworthiness.

Banks also examine the borrower’s debt history, ensuring that the individual does not have significant outstanding debts that could impact their ability to service a new loan.

Advantages of Bank Loans

  • Potentially Lower Interest Rates: Interest rates for bank loans hardly ever exceed the HDB loan interest rate initially.
  • Higher Loan Quantities: Banks might offer higher loan amounts, depending on the borrower’s income and credit score.
  • Longer Loan Tenure: Bank loans can have a tenure of up to 30 years for HDB flats and 35 years for private properties.


  • Fluctuating Interest Rates: After an initial period, the interest rates on bank loans can fluctuate, which might increase the financial burden.
  • Higher Downpayment: Typically, a bank loan requires a 25% downpayment, of which 20% can be from CPF and 5% in cash.
  • Prepayment Penalties: Early repayment of the loan might incur penalties, which is a significant consideration for those who may want to settle their loans early.

Comparing HDB Loans and Bank Loans

Key Differences

Understanding the primary differences between HDB loans and bank loans is essential for making an informed decision. Here’s a breakdown of the main aspects to consider:

  • Source of Loan: HDB loans are exclusively provided by the Singapore government, whereas bank loans are offered by various financial institutions.
  • Interest Rates: HDB loans offer a fixed interest rate of 2.6%. Bank loans, on the other hand, often start at lower rates but are subject to fluctuations based on market conditions.
  • Loan Tenure: HDB loans typically have a maximum tenure of 25 years, while bank loans can extend up to 30 years for HDB flats and 35 years for private properties.

Detailed Comparison Table

Here’s a comparison of the two loan types:

FeatureHDB LoanBank Loan
Interest RateFixed at 2.6%Variable (almost never exceeds 2.6%)
DownpaymentTwo instalments of 10%
One while signing the lease and one at the time of key collection
25% (20% from CPF OA, 5% in cash)
Loan TenureUp to 25 yearsUp to 30 years for HDB, 35 for private
Loan-to-Value LimitUp to 80% of the property valueUp to 75%
Prepayment PenaltyNoneYes (1.5-1.75%)
Late Repayment Penalty8.1% per yearDepends on the bank

So, what does it mean?

Choosing between an HDB loan and a bank loan depends on your financial stability, your tolerance for risk in terms of interest rate fluctuations, and your long-term financial planning.

The stability of HDB loans makes them a reliable choice for those who prefer predictable repayments. Conversely, bank loans might be more suited for those who can manage the risk of interest rate fluctuations in exchange for initially lower rates.

Looking for a reliable loan provider for your HDB flat? At 1AP Capital, we specialise in offering tailored loan solutions to fit your needs. Whether you’re leaning towards a bank or an HDB loan, our team is ready to guide you through the process with ease. Start your application today and move one step closer to securing your new home with confidence.

Pros and Cons of Each Loan Type

Let’s have a detailed look at the advantages and disadvantages of both loan types.

Pros of HDB Loans

  • Stable Repayment Schedule: Fixed interest rate means predictable monthly payments.
  • Government Support: Lower downpayment and more forgiving policies in terms of repayment.
  • Accessibility: More accessible for lower-income families due to less stringent credit score requirements.

Cons of HDB Loans

  • Interest Rate: Higher than the initial rates of bank loans.
  • Flexibility: Less flexibility in terms of loan amount and property type restrictions.

Pros of Bank Loans

  • Lower Initial Interest Rates: Can be beneficial in the short-term if the market conditions are favorable.
  • Flexibility: Available for both HDB flats and private properties, with higher loan amounts possible.
  • Longer Tenure: Offers longer repayment periods, which can reduce monthly payments.

Cons of Bank Loans

  • Interest Rate Risk: Potential for significant increases in interest rates after the initial fixed period.
  • Higher Downpayment: Requires more upfront cash, which can be a barrier for some buyers.
  • Stringent Criteria: Higher credit score and financial stability requirements.

Making the Right Choice: HDB vs. Bank Loans

Deciding whether to opt for an HDB loan or a bank loan when purchasing an HDB flat involves weighing the stability and support of government-backed loans against the potentially lower rates but higher risk of bank loans. Your decision should align with your financial goals, your risk tolerance, and your future financial plans.

If you’re prepared for potential interest rate fluctuations and meet the stricter eligibility criteria, a bank loan might be the right choice. However, if you value stability and predictable payments, an HDB loan could be more suitable.

Ready to Explore Your Loan Options?

If you’re considering applying for a loan and need expert advice tailored to your specific financial situation, 1AP Capital is here to help. We offer a range of loan solutions that cater to both Singaporeans and foreign workers in Singapore.

With our deep understanding of the local financial landscape and commitment to compliance with the Ministry of Law, we can assist you in making the best decision for your housing needs.

For a personalised consultation and to explore your loan options, apply now with 1AP Capital. Let us help you secure the financing you need for your HDB flat with terms that work for you.


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