Have you ever been undecided on something? Those who are intending to buy a property may have experienced this feeling when deciding between a HDB loan or bank loan for HDB.

In this article, we will focus on whether you should consider a bank loan for HDB flat, the interest rate for a HDB loan, and the HDB bank loan downpayment.

We will also look at the key differences between a HDB loan and bank loan, and whether it is okay to pay off your HDB loan using CPF.

What To Know About A HDB Loan

HDB loans are concessionary loans that are available for Singaporeans. If you qualify for a HDB loan, you have to pay an interest rate of 2.6%.

Like any other loan, HDB loans come with certain restrictions. Here are some of the things you should be aware of before you apply for a HDB loan:

  • Out of the buyers involved in the transaction, at least one of them must be a Singaporean.
  • HDB loans only apply to HDB flats.
  • You cannot qualify for a HDB loan if records show that you have had two or more HDB loans in the past.
  • If you intend to buy a five-room or smaller flat as a single, your monthly gross income should not exceed $7,000.
  • Your family’s monthly income, or your extended family’s monthly income should not exceed $14,000 and $21,000 respectively.
  • To be considered a HDB flat buyer, you must not own private residential property in the country or overseas.
  • Before the application, ensure you have not disposed of any private residential property within the last 30 months.

The above HDB loan regulations only apply to buyers of HDB flats.
Those who own commercial properties must not own more than one market or hawker stall property or commercial or industrial property. If you own a hawker stall or commercial property, you must be running a business there and not have any other source of income.

So before applying for a HDB loan, check which category you belong to.

What To Know About A Bank Loan

When you apply for a bank loan, banks want to look at your monthly gross income, savings, your borrowing and payment habits, and your credit score.

If you are taking a secured loan, the bank may further want to know if you have collateral whose value fits the amount you want to borrow.

To ascertain the value of the collateral, the bank may engage an expert to do the value estimation of your property or asset.

Bank loan interest rates change from time to time. Depending on when you apply and the SOR/SIBOR rates, your choice of a bank loan or HDB loan could be a wise or unwise decision.

Key Differences Between A HDB Loan And Bank Loan

A HDB housing loan (or HDB concessionary loan) and a bank loan each come with their benefits and drawbacks in equal measure.

To understand the two before you make an informed decision, we have drawn up the following comparison chart.

HDB Loan Vs Bank Loan

DetailsHDB LoanBank Loan
Where You Get The Loan FromHDBSingapore banks
Eligibility CriteriaSeveral requirements, including at least one buyer being a Singaporean and meeting a certain income ceiling, to not having a property overseas, etcYour credit score, as well as your borrowing and repayment habits
Minimum Loan AmountNo minimum thresholdAbout $100,000
Uses Of The LoanFor HDB flats onlyHDB flats and private properties
Interest Rate2.6% (fixed)Can go as low as 1.2% but keeps fluctuating. May hit 2.2% but usually doesn’t go beyond HDB’s 2.6%. Will increase after two to three years
DownpaymentPay 20% of the total purchase price using CPF Ordinary Account (OA) savings; and up to $5,000 deposit in cash for resale flatsPay 25% of the price of the property (20% from your CPF OA savings, and 5% in cash)
Loan Tenure25 years30 years for HDB flats, 35 years for private properties
Loan-To-Value LimitUp to 80% of the property valueUp to 75%
Prepayment PenaltyNone1.5-1.75%
Late Repayment Penalty7.5% per yearDepends on the bank but they are usually strict

HDB Loan Eligibility

You are eligible for a HDB loan if you are a Singaporean, have not taken two or more HDB loans in the past, and do not have other private properties in the country or abroad.

In addition, your family’s income ceiling or that of your extended family should not exceed $14,000 and $21,000 respectively.

Bank Home Loan Eligibility

Although banks have different evaluation methods, you should be able to qualify for a bank loan if you have a high credit score. You are eligible for a bank loan for HDB if your financial history looks good and if you fulfil the above mentioned criteria.

Banks will also look at your borrowing and debt history. If you do not have any major debts, you may get a bank loan for HDB.

Should You Get A Bank Loan Or HDB Loan?

It is up to you to decide which of the two you should choose. As you have seen, whether it is a HDB loan or bank loan, there are certain eligibility criteria.

You should weigh all the possibilities of getting a loan from either of the two.

To help you, though, here is a quick recap of the two:

1. HDB Loans Usually Do Not Interfere With Your Cashflow

Due to the fixed interest rate, HDB loans allow you to maintain a consistent payment schedule. This is especially ideal for those who have tight budgets.

Hence, it is easy to ascertain the amount you need to set aside every month for repayment of the loan.

HDB loans also have fewer clauses. You don’t have to worry about penalties such as pre-payment or late payment penalties.

On the other hand, the fixed rates that a bank offers usually only lasts about two to three years.

2. HDB Loans Do Not Impose Pre-Payment Penalties

HDB loans do not impose a penalty on those who decide to pay their debt early. On the other hand, banks will impose heavy penalties on you if you pay early during the lock-in period.

In other words, what the bank wanted was to make a profit from you in the form of interest. So it will not be happy if you pay earlier.

The other good thing about a HDB loan is that the faster you pay your HDB bank loan – whether through HDB CPF payment or cash – the less interest you are charged.

But if you attempt to pay your bank loan earlier than agreed, the bank will slap you with a 1.5% penalty.

3. HDB Loans Are Less Punitive Than Bank Loans

If you can’t pay your bank loan, there is a strong likelihood that the bank will impose punitive measures on you.

On the other hand, HDB will try its best to defer your debt. But by hook or by crook, you still need to ensure that you pay your loan as per the loan terms.

4. Bank Loans Have Lower Interest Rates Than HDB Loans

Perhaps, this is the only part where banks beat HDB loans. Bank loans will charge you a lower interest rate, currently between 1.2-2.2%.

HDB loans’ interest is fixed at 2.6%. So if you take a bank loan at a time when the interest rate can be 1.2%, you benefit.

However, you should not smile yet. Bank loan interest rates will keep fluctuating after the lock-in period.

Still, you can be happy with a fixed interest for the first two to three years but brace yourself for higher interest rates pegged to market rates after the third year.

Pros And Cons Of A HDB Loan And Bank Loan

Here are some of the advantages and disadvantages of taking a HDB loan:


  • You can make the initial payment using your CPF OA savings (20%)
  • No penalty for early payment
  • A HDB loan is not likely to affect your cashflow
  • Less punitive than banks if you are late in repaying the loan


  • Long list of requirements
  • High interest rate (2.6%)

Here are some of the advantages and disadvantages of taking a bank loan:


  • Lower interest rate (usually 1.2-2.2%)
  • Less tedious application process
  • Longer loan tenure
  • Available for HDB flats and private properties
  • Lower LTV ratio (75%)


  • The minimum loan amount is $100,000
  • High downpayment of 25% (20% from CPF OA, 5% from cash)
  • Heavy prepayment penalty (usually starts from 1.5%)
  • Heavy late repayment penalty
  • You need a high credit score
  • Fluctuating and higher interest after the third year

Why TDSR And MSR Matter

The Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR) matter a lot, whether you are applying for a HDB loan or a bank loan for HDB.

The two are restrictions set by the government to ensure borrowers do not ask for more than they can be able to repay.

The MSR restricts how much of your monthly income you can spend paying a HDB mortgage, with its 30% cap.

The TDSR, however, restricts how much of your monthly income you can utilise to service all debts. It is currently capped at 55%.

If you are buying a property using a bank loan, you first need to go through MSR followed by TDSR calculations.

Consider If A Bank Loan For HDB Works For You 

Whether you are taking a HDB loan or a bank loan for HDB, you should do your research. Be aware of what each option requires.

At licensed money lender Lending Bee, we are glad to help with expert advice on how to approach each of the two. So rather than asking yourself “Should I pay off my HDB loan using CPF?”, why not visit our offices for a chat?

Contact our friendly loan officers or get started by applying for a loan now.

About Ashley Sim

Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.