Purchasing a property in Singapore often involves choosing between two financing options: an HDB loan or a bank home loan. Each has distinct features tailored to different financial needs and goals. This guide outlines their key differences to help you make an informed decision for your mortgage.


What are HDB loans and bank home loans?

  • HDB loans
    Issued directly by the Housing & Development Board (HDB), these loans are available only for Singapore citizens purchasing HDB flats. They have fixed terms and offer predictable interest rates, making them a popular choice for first-time buyers.

  • Bank home loans
    Offered by banks and financial institutions, these loans cater to both HDB and private property buyers. They provide more flexibility, with options for fixed or floating interest rates.


Key differences between HDB loans and bank home loans

Criteria

HDB loans

Bank home loans

Eligibility

Singapore citizens only, income capped at $14,000 (or $21,000 for extended families).

Available to Singaporeans and foreigners, no income cap but subject to credit checks.

Interest rates

~2.6% per annum (CPF Ordinary Account + 0.1%).

Fixed rates / floating rates ranges from 3.4%-3.8%, tied to SORA.

Loan-to-Value (LTV)

Up to 80% of the flat's purchase price/valuation.

Up to 75%, with at least 5% cash upfront.

Downpayment

Minimum 10% payable via CPF.

Minimum 25%, with 5% in cash.

Loan tenure

Capped at 25 years or until the buyer turns 65, whichever is shorter.

Up to 30 years for HDB flats and 35 years for private properties.

Early repayment penalties

No penalties for early repayment.

Penalty of 1-1.5% during the lock-in period.

Refinancing options

Cannot refinance to another HDB loan; can switch to bank loans.

Flexible refinancing after the lock-in period for better rates.

Eligibility criteria for HDB loans

HDB loans are designed to assist Singapore citizens purchasing HDB flats, but eligibility comes with strict requirements to ensure fairness and accessibility:

  1. Citizenship requirement

    • Only Singapore citizens can apply for HDB loans. Permanent residents and foreigners are excluded from this scheme.

  2. Income ceiling

    • Applicants must have a combined household income of $14,000 or less (or $21,000 for extended families living together). This rule ensures that HDB loans remain accessible to families with lower income levels.

  3. Property ownership

    • To qualify, applicants cannot own any private property, whether in Singapore or overseas. This includes not having sold any private property in the last 30 months.

  4. Loan history

    • Applicants are limited to two HDB loans in their lifetime. If you’ve already taken two HDB loans, you’ll need to seek financing through bank home loans instead.

The strict criteria make HDB loans a suitable choice for first-time buyers and those with limited financial resources, ensuring affordability and prioritising public housing needs.

Eligibility criteria for bank home loans

Bank home loans offer more flexibility and cater to a wider audience, including both Singaporeans and foreigners. However, they come with specific requirements:

  1. Citizenship and residency

    • Unlike HDB loans, bank home loans are available to both Singapore citizens and foreigners, making them a preferred option for private property buyers or expatriates.

  2. Income and creditworthiness

    • There’s no income ceiling, but banks conduct rigorous credit assessments. They evaluate your:

      • Credit score (e.g., TransUnion credit rating).

      • Debt Servicing Ratios (e.g., TDSR capped at 55%).

      • Employment stability and financial assets.

  3. Property type

    • Bank loans cater to buyers of both HDB flats and private properties, including condominiums and landed homes.

  4. Loan terms

    • The terms and amount offered depend heavily on the applicant’s financial profile. Applicants with a strong credit score and stable income may secure more favorable terms.

Bank loans are ideal for buyers with a solid financial background and those seeking to finance private properties or explore flexible repayment options not available under the HDB loan scheme.


When to consider refinancing your home loan

Refinancing your home loan can lead to significant cost savings over time. Here’s when you should consider refinancing:

  • End of lock-in period: For bank loans, this is often the best time to switch to another package offering lower rates.

  • Improved financial standing: If your income or credit score has improved, you may qualify for better terms.

  • Interest rate trends: Falling interest rates can make refinancing an attractive option.

HDB loans, however, cannot be refinanced to another HDB loan but can be refinanced to a bank loan if market rates are favourable.


Common mistakes to avoid when choosing a home loan

  1. Not knowing your available loan options: With multiple banks and financial institutions offering diverse loan packages, failing to compare all your available options may result in higher costs.

  2. Ignoring loan terms: Choosing the longest possible loan tenure may lower monthly repayments but increases total interest paid over time.

  3. Refinancing without proper calculation: Refinancing may offer lower rates, but early repayment penalties and processing fees can offset the savings.


Making the right choice for your home loan

Choosing between an HDB loan and a bank home loan requires careful consideration of your financial goals, eligibility, and repayment capabilities. While HDB loans offer affordability and predictability, bank loans provide flexibility and a broader range of options.

For those seeking a smoother, hassle-free loan search, Lendela is a trusted partner that can guide you in finding the best financing options, helping you achieve your homeownership dreams with confidence.

Regularly reviewing your loan options ensures you make the most of changing market conditions. For the most updated information, refer to official resources like theHDB website.