HDB Loan vs Bank Loan for buying Property

HDB Loan vs Bank Loan for buying Property

I decided to do a simple write up for this as I have clients and prospect asking me about the differences of a HDB Loan and a Private Bank Loan should one consider buying a property in Singapore.

HDB Loan

As literally as it is, HDB Loans are only for HDB Flats, and you have some eligibility criterias to meet as written below. For starters you must not have taken a HDB loan for more than 2 times. Also, that is not all, you should not have any private property in Singapore or overseas, and you must not have recently dispose any private property within the last 30 months. And at least 1 of the loan applicant have to be a Singapore Citizen with a combined monthly income of less than $14,000 or a Single monthly income of less than $7000.

From the above, there are definitely more criterias that one has to meet compared to a bank loan, however lets move forward to look at other technical aspects of the HDB Loan.

Interest Rates are fixed at 2.6% with a maximum tenure of 25years with no lock in period. You would be able to have a Loan to Value (LTV) ratio of up to 85%, with the 15% of the principal be paid with CPF/Cash. However do note that we can only either choose to use up all our CPF OA savings or to set up to $20,000 aside, before teh balance is granted as loan.

Refinance with other bank loan to enjoy lower interest rate, however this is irreversible should you llike to take back a HDB loan.


Bank Loan

However on the other side of the coin, a bank loan doesn't have much criteria as they are based on your income and status of your credit checks. So you shouldn't have much worries as long as you didn't have any bad debts.

On the technical side, we would be looking at floating interest rates from 1.5%. With floating interest rates you are looking at a overall more turbulent interest rate as they would be fluctuating according to the economy. It is something that one should consider, or it could be used to your advantage if one is economically saavy.

Moving forward, the Loan to Value Ratio is 75%, with 20% paid with CPF or Cash and the remaining 5% have to be paid with Cash only. We would also be looking at a 30 years maximum tenure with a 2 years lock in period. This meant that you would be subjected to early repayment fees should you need to refinance during the lock in period.

However after 2 years, we are able to refinance with other bank loan to enjoy lower interest rate.

That being said, there is no right or wrong answer as they are all dependent on our financial goals, and what is our comfort zone. Both are prudent in their own rights with the HDB Loan giving more loan coverage without cash, while the Bank Loan have their perks of coming with a lower interest rates. So it all have to depends on what you're looking for.
Back to blog

Leave a comment

Please note, comments need to be approved before they are published.