4 Key Differences between HDB Loan and Bank Loan


Getting your very first HDB flat may be an overwhelming experience, especially when deciding between a HDB Loan and a Bank Loan. There are many factors to consider and it can become rather confusing and nerve-racking, especially since we want the best bang for the buck. Here are 4 key differences between a HDB Loan and a Bank Loan to help you make an informed decision.

4 Key Differences between HDB Loan and Bank Loan

  1. Eligibility

To be eligible for a HDB loan, at least 1 buyer has to be a Singapore citizen. On top of that, the average gross monthly income has to be less than S$12,000, or S$6,000 for singles buying 5-room or smaller resale flat, or 2-room new flat in a non-mature estate.

As for bank loans, there are much fewer restrictions. Singapore Permanent Residents and even Foreigners can obtain home loans from the banks.  There are usually minimum income requirements as well as the need for a good credit score before the bank is willing to lend money to you.

  1. Interest Rate

For HDB loans, the interest rate is pegged to the interest rate of the Central Provident Fund (CPF) Ordinary Account (OA). On the other hand, the interest rates of bank loans come in two forms, floating rates and fixed rates. The mortgage loan rates then differ depending on the bank loan you choose.

  1. Downpayment

A HDB loan requires a downpayment of 10 percent of the cost of the property. However, this can be paid using your CPF. A bank loan though, requires a downpayment of 20 percent, of which 5 percent has to be paid using cash.

  1. Penalties

HDB loans have no early repayment penalty and has a lower late payment penalty. On the other hand, you will incur an early repayment penalty of your bank loan of about 0.75 percent to 2 percent should you repay your loan in advance, and there is a higher penalty for late payments of your loan.