HDB Loan vs Bank Loan 2026: Which Saves You More Money?

When buying an HDB flat in Singapore, you face a critical financial decision: should you take an HDB concessionary loan or refinance with a bank loan? The answer depends on your financial situation, risk tolerance, and long-term goals. At Homejourney, we believe every property buyer deserves clear, transparent information to make confident decisions. This guide compares both options side-by-side so you can determine which financing path truly saves you money.

Understanding HDB Loans: The Concessionary Option

An HDB loan is a concessionary loan offered directly by the Housing & Development Board to Singapore citizens buying HDB flats. The term "concessionary" means the government subsidizes your interest rate, making it more affordable than market rates.

The current HDB loan interest rate stands at 2.6% per annum, which is pegged to the CPF Ordinary Account (OA) interest rate plus 0.1%. This rate is fixed and adjusted quarterly in January, April, July, and October. Unlike bank loans, this rate does not fluctuate with market conditions, providing predictability in your monthly repayments.

Understanding Bank Loans: The Market-Based Option

Bank loans for HDB flats are offered by financial institutions regulated by the Monetary Authority of Singapore (MAS). These loans are based on market interest rates and come in two varieties: fixed-rate packages (typically 1-3 years) and floating-rate packages pegged to benchmarks like SORA (Singapore Overnight Rate Average).

Current bank loan rates range from 1.2% to 3.0% per annum, depending on the bank, package type, and market conditions. Many banks are currently offering competitive rates around 2.2% for fixed-rate packages, making them potentially cheaper than HDB's 2.6% rate.

Interest Rates: The Most Critical Comparison

Interest rate is the single biggest factor determining your total cost of borrowing. Even a 0.4% difference compounds significantly over 25-30 years.

The chart below shows recent interest rate trends in Singapore to help you understand how rates have moved:

As you can see, bank loan rates have become increasingly competitive. If you're currently on an HDB loan at 2.6%, refinancing to a bank loan at 2.2% could save you approximately S$3,500 in the first year alone on a S$350,000 loan. However, this advantage comes with important caveats: after your fixed-rate period ends (typically 2-3 years), your rate may revert to a floating rate pegged to SORA, which fluctuates with market conditions.

Down Payment Requirements: Cash Flow Impact

The down payment requirement significantly affects how much cash you need upfront—money that could otherwise go toward renovations, furnishings, or emergency savings.

HDB Loan Down Payment

HDB loans require a 20% down payment of the purchase price. The critical advantage: you can pay 100% of this down payment using CPF Ordinary Account (OA) funds. This means if you have sufficient CPF savings, you may not need to pay any cash upfront.

For a typical 4-room HDB flat priced at S$400,000, the down payment would be S$80,000—potentially all paid from CPF with zero cash required from your pocket.

Bank Loan Down Payment

Bank loans require a 25% down payment, which is S$100,000 on the same S$400,000 flat. Critically, at least 5% (S$20,000) must be paid in cash. The remaining 20% can be paid using CPF or cash.

This means you're required to have at least S$20,000 in liquid cash available, which many first-time buyers find challenging when budgeting for renovations and moving costs.

Loan-to-Value (LTV) Limits: How Much You Can Borrow

LTV determines the maximum loan amount as a percentage of your property's value. A higher LTV means you can borrow more, but it also means higher total interest paid over the loan term.

HDB Loan LTV: 80% – You can borrow up to 80% of the purchase price, requiring only 20% down
Bank Loan LTV: 75% – You can borrow up to 75% of the purchase price, requiring 25% down

The higher HDB LTV initially seems advantageous, but it's a double-edged sword. A larger loan amount means more interest accumulates over time. On a S$400,000 flat with an 80% LTV, you'd borrow S$320,000 from HDB. The same property with a 75% bank loan means borrowing S$300,000—S$20,000 less in principal, translating to lower total interest paid.

Eligibility Criteria: Who Qualifies?

Not everyone qualifies for both loan types. Understanding eligibility requirements is crucial before committing to a financing strategy.

HDB Loan Eligibility

HDB loans have stricter eligibility requirements:

Must be a Singapore citizen
Must not exceed the income ceiling (currently S$14,000 gross monthly household income for new flats, S$12,000 for resale flats)
Must not own another property (with limited exceptions)
Must meet CPF contribution requirements
Credit assessment is less stringent than banks

The income ceiling is a significant barrier for higher-earning households. If your household income exceeds the ceiling, you're ineligible for HDB loans regardless of other qualifications. For detailed eligibility assessment, refer to our comprehensive guide on HDB Loan Eligibility 2026: Who Qualifies & How Much | Homejourney .

Bank Loan Eligibility

Bank loans have less strict but more credit-focused requirements:

Must be aged 21-65 years old
Can be Singapore citizen, PR, or foreigner
Must have a good credit score (banks assess credit history)
Must meet the Total Debt Servicing Ratio (TDSR) requirement—typically your total monthly debt repayments cannot exceed 60% of gross monthly income
Must have stable income documentation
No property ownership restrictions

Banks conduct stricter financial assessments. They evaluate your entire financial picture: credit history, income stability, existing debts, and repayment capacity. If you have missed payments, high credit card balances, or irregular income, bank approval becomes challenging.

Early Repayment and Lock-In Periods

Life circumstances change. Understanding early repayment terms helps you plan for flexibility.

HDB Loans: Maximum Flexibility

HDB loans offer no lock-in period and no early repayment penalty. You can refinance to a bank loan anytime or pay off your loan early without financial penalties. This flexibility is valuable if your financial situation improves or if you decide to upgrade to a private property.

Bank Loans: Restricted Flexibility

Bank loans typically have a 2-3 year lock-in period during which early repayment incurs a penalty—usually 1.5% of the outstanding loan amount. On a S$300,000 loan, this penalty equals S$4,500. After the lock-in period ends, you can refinance or repay without penalty, but you may face a floating rate if your fixed-rate period has expired.

Rate Stability: Fixed vs. Floating

Rate stability affects your ability to budget accurately for monthly repayments.

HDB Loans: Predictable Stability

HDB's 2.6% rate is fixed and pegged to CPF OA interest rate + 0.1%. While it adjusts quarterly, these adjustments are typically small (0.1-0.2% per year). Your monthly repayment remains relatively stable, making budgeting predictable.

Bank Loans: Variable Risk

Bank loans come in two structures:

Fixed-Rate Packages (1-3 years): Your rate is locked in, providing stability. After the fixed period, your rate typically reverts to a floating rate pegged to SORA, which fluctuates monthly based on market conditions
Floating-Rate Packages: Your rate fluctuates immediately with SORA, meaning your monthly repayment can increase or decrease monthly

In the current environment with market uncertainty, many banks are promoting floating-rate packages. While these offer lower initial rates, they expose you to interest rate risk. If SORA increases, your monthly repayment increases—potentially significantly if rates rise sharply.

The Total Cost Comparison: A Real Example

Theory is helpful, but numbers tell the real story. Let's compare the total cost of an HDB loan versus a bank loan for a realistic scenario.

Scenario: Buying a 4-room HDB flat for S$400,000, 25-year loan term

HDB Loan: 2.6% interest rate, 80% LTV, S$320,000 borrowed, 20% (S$80,000) down payment
Bank Loan: 2.2% interest rate (fixed for 3 years), 75% LTV, S$300,000 borrowed, 25% (S$100,000) down payment

Total interest paid over 25 years:

HDB Loan: Approximately S$151,000 in interest
Bank Loan: Approximately S$129,000 in interest (during fixed period; floating rate after year 3 would increase this)

The bank loan saves approximately S$22,000 in interest during the fixed-rate period. However, this advantage disappears if SORA increases significantly after year 3. Additionally, the bank loan requires S$20,000 more in upfront cash (S$100,000 vs. S$80,000), which may not be available for all buyers.

Should You Refinance from HDB to Bank Loan?

If you already have an HDB loan, refinancing becomes relevant when bank rates drop significantly below 2.6%. Current market conditions show bank rates at 2.2% for fixed-rate packages, creating a refinancing opportunity.

When Refinancing Makes Sense

Bank rates are at least 0.3-0.4% lower than your HDB rate
You have a substantial remaining loan balance (refinancing costs are lower relative to savings)
You're comfortable with rate risk after your fixed-rate period ends
You have at least 5 years remaining on your loan (gives time to recover refinancing costs)

When Refinancing Doesn't Make Sense

You're close to loan maturity (few years remaining)
You're risk-averse and value the stability of HDB's fixed rate
You have poor credit standing (bank approval unlikely)
You're planning to upgrade to a private property soon (refinancing costs not worth it)

Use Homejourney's to calculate your potential savings from refinancing. Enter your current loan details and compare scenarios instantly.

Comparing Rates Across All Banks

If you're considering a bank loan, comparing rates across multiple banks is essential. Bank rates vary significantly—a 0.3% difference on a S$300,000 loan saves you approximately S$2,250 per year.

Homejourney's Bank Rates feature allows you to compare current rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, and other major lenders instantly. You can also calculate your eligibility for each bank's products and submit one application to receive competing offers—letting banks compete for your business rather than you chasing them individually.

Key Advantages and Disadvantages Summary

HDB Loans Are Better If:

You want predictable, stable monthly repayments without interest rate risk
You have limited cash savings and prefer to use CPF for the entire down payment
You value simplicity and no lock-in periods
You're risk-averse and uncomfortable with floating rates
Your income is above the HDB ceiling (in which case you have no choice)

Bank Loans Are Better If: