Purchasing your first HDB flat can be quite a daunting experience. From applying for the unit to receiving the house keys, there’s a lot you need to be informed about. Moreover, an HDB flat is a top priority for Singaporeans trying to make a more informed decision to save some cash. 

Getting an HDB flat, you’ll either have to choose between an HDB loan and a bank loan, which is not always an easy decision. Your financial needs and personal preferences are key in helping you decide on the loan that best suits your need. 

This article looks at HDB loan vs bank loan and which is better. 

HDB Loan Vs Bank Loan 

Both HDB housing loans and bank loans have a list of pros and cons. The following are the key differences at a glance:

Type Of LoanHDB Housing LoanBank Loan
What Is It?The Housing & Development Board gives home loans (HDB)Banks give home loans in Singapore, such as DBS and UOB.
Borrower EligibilitySeveral requirements are needed, such as citizenship and the income ceilingNormally a good credit score is enough
Property EligibilityHDB flats onlyBoth private property and HDB flats
Minimum Loan SizeNoneNormally at least $100,000
Loan-To-Value LimitCan borrow upto 80% of the propertyCan borrow up to 75% of property value
DownpaymentYou can fully pay 20% of the purchase price using the CPF OA savings. For resale flats, you must pay up to a $5,000 deposit25% of the purchase price and at least 5% of the amount in cash. You can use up to 20% of CPF OA savings
Interest RatesCurrently, 2.6% p.a capped at +0.1% of CPF OA interest rateCurrently, from 2.7& for the floating rates or 3.45% for the fixed rates depending on the market environment
Package TypesOnly a single typeMostly floating rate packages, some fixed rate packages, as well as hybrid packages
Maximum Loan TenureUp to 25 yearsUp to 30 years
Prepayment Or Early Repayment PenaltyNoneNormally 1.5% to 1.75%
Late Repayment Penalty7.5% p.a., which can be negotiatedDepends from bank to bank but is not as lenient as HDB

The amount offered for HDB loans depends on the buyer’s monthly income, financial situation, and age.

Eligibility Criteria For A HDB Loan And Bank Loan

HDB Loan Eligibility Criteria

  • Before taking out an HDB loan, you should check whether you’re eligible in the first place. 
  • At least one of the buyers should be a Singapore citizen
  • The monthly income should be $14,000 for families, $21,000 for extended families, and $7,000 for singles purchasing a resale 5-room flat or a new 2-room Flexi flat in a non-mature estate.
  • The buyer doesn’t own more than one hawker stall, market, or commercial/industrial property. If you own only one of these, you must be operating the business at the premise with no other income source.
  • The buyer cannot have taken over two housing loans from HDB.
  • For buyers with a single HDB housing loan, the last owned property can’t be a private residential property.

Bank Loan Eligibility Criteria

A bank loan for housing is a home loan that you can borrow from any financial institution regulated by the Monetary Authority of Singapore. There are several different bank loans, from the fixed rate package, the floating rate package, or the hybrid package. The only criterion is good financial standing and a good credit score. 

Pros And Cons

Pros of HDB Loans

  • A smaller downpayment amount to pay of 20%, which can be fully paid using cash, CPF OA funds, or a combination of both
  • Interest rates are less likely to fluctuate like in backs and are pegged by the CPF OA interest rate
  • There are flexible refinance options with no lock-in period
  • There is no penalty for early repayment, allowing you to reduce the overall interest


  • They attract a higher interest rate currently capped at 2.6% p.a., unlike banks with lower rates
  • A higher accumulated payable amount due to the higher LTV and interest rate meansfewer savings in the long run

Pros Of A Bank Loan

  • A lower interest rate which is lower than HDB loans
  • The eligibility criteria are less strict such as the lack of an income ceiling
  • You can refinance or reprice your home loan

Cons Of A Bank Loan

  • There’s an early repayment penalty due to the lock-in period for banks, which is usually 1.5% of the loan amount.
  • The interest rates fluctuate according to the inconsistent market fluctuations
  • There is a higher down payment required of at least 25% and at least 5% in cash
  • Limited refinancing options mean you can’t change to an HDB loan during the loan period


Regardless of the type of loan, the Mortgage Servicing Ratio (MSR) and the Total Debt Servicing Ratio (TDSR) restrictions will apply. These measures are put in place by the government and not the banks or HDB to ensure borrowers don’t borrow more than they can afford. 

Total Debt Servicing Ratio (TDSR)

The TDSR is a restriction for all the borrowers’ liabilities, not just the mortgage. This implies that if one is servicing multiple loans, they might be unable to take out a home loan or may have to loan less. After the announcement of the Sep 2022 property cooling measures, there has been a 0.5% increase in the interest rate floor used for MSR and TDSR computations, effective 30 Sep 2022. For HDB loans, the medium-term interest rate is 3%, while for bank loans, the medium-term interest rate is 4%.

Mortgage Servicing Ratio (MSR)

If you’re purchasing an HDB property, including executive condominiums, the MSR will likely restrict you. MSR states that the monthly repayments for a mortgage can’t surpass 30% of the borrower’s or joint borrower’s monthly income. This is also effective from 30 Sep 2022. 

Key Considerations For A HDB Loan Vs Bank Loan

If you’ve read this far and are still unsure of the best, ask yourself this question: “Are you motivated by saving some cash, or do you not mind paying more to avoid all the hassle?” Your answer may help you determine whether a bank loan or an HDB loan in Singapore is the best for you. Your personal preference and financial situation will help you determine the best loan. Below are some of the key points to consider:

  • HDB loan down payments are payable by CPF and lesser
  • Bank loans have lower interest rates
  • HDB loans are more stable with a fixed interest rate
  • HDB loans have a higher LTV meaning more interest
  • Bank loans have an early repayment penalty
  • Bank loans are less forgiving on fees and penalties
  • You can only refinance from an HDB to a bank loan


If you’ve come down to the ideal home loan for your situation, that’s the first real step to the keys to your new home. However, that’s not the end of the story, as you’ll need home insurance as you piece together the final touches with furnishings and décor. At U Credit, we have the best loan terms for your specific financial situation.