HDB Loan vs Bank Loan 2026: Which Saves You More Money?
When buying your first HDB flat or upgrading to a private property, choosing between an HDB loan and a bank loan is one of the most important financial decisions you'll make. In 2026, the gap between HDB's fixed 2.6% interest rate and bank loans (currently from 2.20% p.a.) has widened significantly, making this comparison more critical than ever.[1][2] This guide breaks down the real differences, helps you understand the Mortgage Servicing Ratio (MSR) limits that affect your borrowing power, and shows you exactly how much you could save by choosing the right loan type.
Understanding HDB Loans vs Bank Loans: The Core Differences
An HDB loan is a concessionary loan offered by the Housing & Development Board specifically for Singapore citizens buying HDB flats.[1] The interest rate is fixed at 2.6% per annum, pegged at 0.1% higher than the CPF Ordinary Account (OA) interest rate, and adjusted quarterly.[1] Bank loans, by contrast, are offered by financial institutions regulated by the Monetary Authority of Singapore and typically feature variable interest rates ranging from 1.2% to 3% per annum, depending on market conditions.[1]
The most significant advantage of bank loans in 2026 is their lower interest rates. A three-year fixed bank loan could save you approximately S$3,500 in the first year alone on a S$350,000 loan compared to an HDB loan.[4] However, this advantage comes with trade-offs in terms of flexibility, downpayment requirements, and eligibility criteria that we'll explore below.
Interest Rates: Why Bank Loans Are Currently Cheaper
The interest rate difference between HDB and bank loans is the primary factor driving refinancing trends in 2026.[5] HDB's fixed 2.6% rate hasn't changed, but bank mortgage rates have dropped to 3-year lows, making them increasingly attractive.[7] Most banks now offer competitive rates starting from 2.20% p.a., particularly for fixed-rate packages lasting 1-3 years before reverting to floating rates pegged to SORA (Singapore Overnight Rate Average).[2]
The chart below shows recent interest rate trends in Singapore to help you understand how rates have moved:
For first-time buyers, this rate advantage is substantial. On a S$280,000 loan (typical for a 4-room HDB flat with 20% downpayment), the difference between 2.6% and 2.20% translates to roughly S$1,120 in annual interest savings with a bank loan. Over a 25-year mortgage, this compounds to significant savings, though you'll need to factor in lock-in periods and early repayment penalties that bank loans impose.[1]
Downpayment Requirements: The CPF Advantage of HDB Loans
One of the most compelling reasons to choose an HDB loan is the downpayment flexibility. HDB loans require only 20% downpayment, and this can be paid entirely using your CPF Ordinary Account (OA) funds, cash, or a combination of both.[1][3] This means first-time buyers with sufficient CPF savings can purchase an HDB flat with zero cash outlay.
Bank loans, conversely, require 25% downpayment with a strict requirement: at least 5% must be paid in cash.[1][3] For a S$400,000 property, this means you'll need S$20,000 in cash upfront, which many first-time buyers don't have readily available. The remaining 20% can be paid using CPF OA or cash. This cash requirement is a significant barrier for younger buyers with limited savings, making HDB loans more accessible for this demographic.
However, if you have sufficient cash reserves, the lower interest rate of bank loans often justifies the higher downpayment requirement over the life of the loan.
Loan-to-Value (LTV) Limits and Borrowing Power
HDB loans allow up to 80% LTV (Loan-to-Value), meaning you can borrow up to 80% of the purchase price, subject to your CPF balance.[1][3] Bank loans cap out at 75% LTV.[1][3] This 5% difference might seem small, but it affects your total borrowing capacity significantly.
For a S$400,000 HDB flat: HDB loan allows S$320,000 (80%), while a bank loan allows S$300,000 (75%). This S$20,000 difference means you'd need an additional S$20,000 downpayment for the bank loan. However, the higher LTV of HDB loans also means you're borrowing more, which increases the total interest you'll pay over 25 years—potentially negating the savings from lower downpayments.
MSR and Eligibility: Understanding Your Borrowing Limits
The Mortgage Servicing Ratio (MSR) is a critical factor that determines how much you can borrow, and it differs significantly between HDB and bank loans. The MSR 30% limit is the maximum percentage of your gross monthly income that can go toward housing loan repayments.[1] This is one of the most important constraints you'll face when applying for either loan type.
For HDB loans: The MSR limit is 30% of your gross monthly income. If you earn S$5,000 monthly, your maximum monthly housing loan repayment is S$1,500. This determines your maximum loan amount based on the interest rate and loan tenure.[1]
For bank loans: Banks use the Total Debt Servicing Ratio (TDSR) framework, which is stricter. Your total monthly debt repayments (including mortgage, car loans, credit cards, and other obligations) cannot exceed 60% of your gross monthly income. This means if you have existing debts, your borrowing power for a bank loan is significantly reduced compared to HDB loans.[2]
For a comprehensive breakdown of how MSR affects your eligibility, see our detailed guide on MSR Guide for HDB and EC Buyers: Calculate Your Mortgage Eligibility . Additionally, understanding TDSR is essential for bank loan applications—our TDSR Explained: Mortgage Eligibility & Bank Rates Guide | Homejourney provides detailed calculations and examples.
This MSR/TDSR difference is crucial: HDB loans are more accessible for buyers with existing debts because HDB only considers housing loan repayments, not total debt. Bank loans penalize you for car loans, credit card debt, or personal loans, making them less suitable if you carry significant non-mortgage debt.
Lock-In Periods and Early Repayment Penalties
HDB loans have no lock-in period and no penalty for early repayment.[1][2] This flexibility is invaluable if you receive a bonus, inheritance, or windfall and want to reduce your loan balance faster. You can also refinance to a bank loan at any time without penalties.
Bank loans typically have 2-3 year lock-in periods with early repayment penalties of around 1.5% of the loan amount.[1][2] This means if you want to refinance or pay off your loan early during the lock-in period, you'll face significant penalties. However, once the lock-in period expires and your rate reverts to floating, you gain more flexibility.
For buyers who anticipate receiving lump sums or want maximum flexibility, HDB loans are clearly superior. For those committed to a long-term fixed rate, bank loans' lock-in periods are less concerning.
Eligibility Requirements: Who Qualifies for Each Loan?
HDB Loan Eligibility: You must be a Singapore citizen, meet income ceiling requirements (varies by flat type), and not own another property.[1][2] HDB loans don't require a strong credit score—eligibility is based primarily on citizenship and income. This makes HDB loans more accessible for buyers with imperfect credit histories.
Bank Loan Eligibility: Banks are more flexible on citizenship (accepting PRs and some foreigners aged 21-65 years old) but stricter on credit assessment.[2] Banks evaluate your credit history, income stability, and existing debt obligations under the TDSR framework. A poor credit score or high existing debt can disqualify you from bank loans entirely.[2]
If you're a foreigner or PR looking to buy in Singapore, bank loans may be your only option, as HDB loans are restricted to citizens. See our Foreigner Mortgage Eligibility Singapore: Bank Rates Guide | Homejourney for detailed information on financing options for non-citizens.
Property Type Restrictions
HDB loans are available exclusively for HDB flats.[1][3] Bank loans work for both HDB flats and private properties (condos, landed houses, etc.). If you're buying a private property, a bank loan is your only option. If you're upgrading from an HDB flat to a private property, this is a significant consideration in your financing strategy.
How to Compare and Choose: A Decision Framework
Choose an HDB loan if:
- You're buying an HDB flat and have limited cash savings (the 20% downpayment can be fully paid with CPF)
- You have existing debts (car loans, credit cards) that would reduce your bank borrowing power under TDSR
- You value flexibility and want no lock-in periods or early repayment penalties
- You have a lower credit score or limited credit history
- You anticipate receiving bonuses or windfalls and want to pay down your loan faster
Choose a bank loan if:
- You're buying a private property (bank loans are your only option)
- You have sufficient cash reserves (at least 5% of the purchase price) and want to minimize interest costs
- You have a strong credit score and low existing debt (favorable TDSR position)
- You want to lock in a lower fixed rate for 2-3 years and aren't concerned about early repayment flexibility
- You're buying an HDB flat but prioritize long-term interest savings over short-term flexibility
To calculate your exact borrowing power under MSR and TDSR constraints, use Homejourney's mortgage eligibility calculator at Bank Rates . This tool instantly shows you how much you can borrow from each major bank based on your income and existing debts, helping you make an informed decision.
Real-World Savings Comparison: HDB vs Bank Loan
Let's work through a concrete example. Assume you're buying a S$400,000 HDB flat with 20% downpayment (S$80,000) and need to borrow S$320,000:
HDB Loan (2.6% p.a., 25-year tenure):
- Monthly repayment: S$1,482
- Total interest paid over 25 years: S$243,600
Bank Loan (2.20% p.a., 25-year tenure):
- Monthly repayment: S$1,398
- Total interest paid over 25 years: S$199,200
Savings with bank loan: S$44,400 in interest, plus S$84 monthly savings
However, if you have S$10,000 in existing debt (car loan) with S$300 monthly repayment, your TDSR calculation changes. With the bank loan, your total debt servicing ratio becomes (S$1,398 + S$300) / gross monthly income. If your gross income is S$5,000, that's 33.96%—exceeding the 60% TDSR limit when combined with other obligations. The HDB loan, however, only considers the S$1,482 housing repayment (29.64% MSR), making it more accessible.
This example illustrates why there's no one-size-fits-all answer. Your personal financial situation—cash reserves, existing debts, credit score, and property type—determines which loan is truly better for you.
Refinancing: Can You Switch Later?
Many buyers start with an HDB loan for its accessibility, then refinance to a bank loan once they've built equity or their financial situation improves. HDB loans offer no lock-in period, making refinancing penalty-free.[1][2] If you refinance after 3-5 years, you've already paid down some principal, and the remaining loan balance might be smaller, making bank loan refinancing more attractive.
In 2026, refinancing from HDB to bank loans has become increasingly popular as bank rates have dropped to 3-year lows.[5] If you're considering refinancing, Homejourney's bank rates page lets you compare current offers from DBS, OCBC, UOB, HSBC, Standard Chartered, and other major lenders in one place, helping you find the best refinancing deal.
Getting Started: Next Steps with Homejourney
Choosing between an HDB loan and a bank loan is a major decision that affects your finances for 25+ years. To make the best choice for your situation:
- Calculate your borrowing power: Use Homejourney's mortgage eligibility calculator to see how much you can borrow under both HDB and bank loan MSR/TDSR constraints. Visit Bank Rates to get started.
- Compare current bank rates: View real-time rates from all major Singapore banks on Homejourney's bank rates page. Rates change frequently, so checking current offers is essential.
- Apply via one application:
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