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

When buying an HDB flat in Singapore, you face a critical decision: should you take an HDB loan or a bank loan? While HDB loans offer lower down payments and stable interest rates, bank loans currently come with significantly lower rates that can save you tens of thousands of dollars over your loan tenure. The answer depends on your financial situation, risk tolerance, and long-term plans.

This guide breaks down the key differences between HDB and bank loans in 2026, helping you make an informed decision that aligns with your financial goals. At Homejourney, we believe in empowering property buyers with transparent, verified information so you can confidently navigate Singapore's mortgage landscape.

The Current Interest Rate Landscape (2026)

The most significant difference between HDB and bank loans today is the interest rate. HDB loans are fixed at 2.6% per annum, pegged at 0.1% above the CPF Ordinary Account (OA) interest rate.[1] This rate remains stable and doesn't fluctuate with market conditions.

Bank loans, however, now offer rates starting from 1.2% to 3% per annum, with many competitive packages falling below the HDB rate.[2] This represents a significant shift in the mortgage landscape, making bank loans increasingly attractive for borrowers who can qualify.

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

As you can see from the chart, bank mortgage rates have been trending lower, creating a widening gap between HDB's fixed 2.6% and competitive bank offerings. For example, switching from an HDB loan to a three-year fixed bank loan could save approximately S$3,500 in the first year alone on a S$350,000 loan.[3]

Down Payment Requirements: HDB's Clear Advantage

One of HDB's strongest selling points is its flexible down payment structure. HDB loans require only 20% down payment, which can be paid entirely using your CPF Ordinary Account (OA) funds, cash, or a combination of both.[1] This means you might not need to spend any cash from your pocket at all.

Bank loans, by contrast, require 25% down payment, with a mandatory 5% paid in cash.[1] The remaining 20% can come from CPF or cash. For a typical four-room HDB flat valued at S$400,000, this translates to approximately S$20,000 in cash that must come from your own pocket—money you could otherwise use for renovations, furnishings, or emergency reserves.

This is particularly advantageous for first-time buyers with limited liquid savings. By preserving your cash reserves, you maintain financial flexibility for unexpected expenses or opportunities.

Loan-to-Value (LTV) Limits: Borrowing Power Comparison

HDB loans offer a higher Loan-to-Value (LTV) limit of up to 80% of the purchase price, subject to your CPF balance.[1] This means you can borrow more, which is beneficial if you have a lower income or limited savings.

Bank loans cap LTV at 75% of the purchase price or bank valuation, whichever is lower.[1] While this seems like a disadvantage, the lower interest rates often offset the need to borrow more.

However, there's an important caveat: a higher loan amount means more accumulated interest over time. While young homeowners with lower incomes may benefit from HDB's 80% LTV, paying more interest over 25-30 years can cost significantly more in total repayment.

Interest Rate Stability: Fixed vs. Floating

HDB's 2.6% interest rate is fixed for life—it never changes regardless of market conditions.[1] This provides absolute certainty in your monthly repayments and protects you from rising rates.

Bank loans typically offer two options: fixed-rate packages (usually 1-3 years) or floating rates pegged to SORA (Singapore Overnight Rate Average).[2] After the fixed period ends, your rate reverts to floating, which fluctuates with market conditions. This means your monthly repayment could increase significantly if interest rates rise.

For conservative borrowers who value predictability, HDB's fixed rate provides peace of mind. For those willing to accept rate risk in exchange for lower initial payments, bank loans offer better value—especially if rates decline or stay stable.

Early Repayment and Refinancing Flexibility

HDB loans have no early repayment penalties and no lock-in period.[1] You can refinance to a bank loan at any time without facing financial penalties. This flexibility allows you to switch to a cheaper bank loan if rates become significantly more favorable.

Bank loans typically have a lock-in period of 2-3 years with early repayment penalties of approximately 1.5% of the loan amount.[1] This restricts your ability to refinance during the initial period, though some banks offer promotional packages with lower or waived penalties.

This flexibility makes HDB loans attractive as a "stepping stone." You can start with an HDB loan and refinance to a bank loan when rates become attractive or when your financial situation improves.

Eligibility Requirements: Who Qualifies?

HDB loans have stricter eligibility criteria focused on citizenship and income ceilings. You must be a Singapore citizen with a valid NRIC, and there are income limits depending on your flat type and family composition.[2] Credit score is less critical for HDB loans.

Bank loans are more flexible in terms of eligibility but require a strong credit score and thorough financial assessment.[2] Banks evaluate your credit history, gross monthly income, income stability, and Total Debt Servicing Ratio (TDSR)—your total monthly debt obligations cannot exceed 60% of your gross monthly income.

If you're a first-time buyer with limited credit history, an HDB loan may be easier to obtain. If you have strong income and good credit, bank loans offer better rates and more options.

Home Protection Scheme (HPS) and Mortgage Insurance

Both HDB and bank loans offer protection against unforeseen circumstances. HDB's Home Protection Scheme (HPS) is mandatory for HDB loans and covers you in case of death, total permanent disability, or retrenchment.[1] The premium is built into your loan and is relatively affordable.

Bank loans typically require Mortgage Reducing Term Assurance (MRTA) or similar mortgage protection insurance. This is optional but highly recommended, as it protects your family if you pass away before the loan is fully repaid. For more details on protection options, see our guide on Home Protection Scheme HPS: Complete HDB Buyers Guide | Homejourney ">Home Protection Scheme HPS: Complete HDB Buyers Guide.

Making Your Decision: A Practical Framework

Choose an HDB loan if:

You want absolute certainty in your monthly repayments with no rate risk
You have limited cash savings and need to preserve liquidity for renovations or emergencies
You plan to stay in your HDB flat long-term and aren't concerned about refinancing
Your income is near the HDB ceiling and you may not qualify for a bank loan
You value simplicity and want minimal paperwork

Choose a bank loan if:

You have strong income and good credit to qualify for competitive rates
You want to minimize total interest paid over your loan tenure
You're comfortable with rate risk and can absorb potential payment increases
You plan to refinance or upgrade within 5-10 years
You want flexibility to repay early without penalties (after lock-in period)

To calculate your borrowing power and compare rates from all major Singapore banks, use Property Search ">Homejourney's mortgage eligibility calculator. You can instantly see how much you can borrow and compare rates from DBS, OCBC, UOB, HSBC, Standard Chartered, and more in one place.

The Real Cost Comparison: Numbers Matter

Let's look at a concrete example. For a S$400,000 HDB flat with a 20-year loan tenure:

HDB Loan (2.6% fixed): Monthly repayment approximately S$1,900; Total interest paid approximately S$56,000

Bank Loan (2.0% fixed for 3 years, then 2.5% floating): Monthly repayment approximately S$1,800 initially; Total interest paid approximately S$45,000 (assuming rates stay stable after fixed period)

This represents a savings of approximately S$11,000 over the loan tenure—money you could invest, use for property upgrades, or build as emergency reserves.

However, if bank rates rise significantly after the fixed period, the gap narrows. The key is understanding your risk tolerance and financial flexibility.

Refinancing Strategy: The Hybrid Approach

Many savvy Singapore homeowners use a hybrid strategy: start with an HDB loan for its flexibility and lower down payment, then refinance to a bank loan when rates become attractive.[4] Since HDB loans have no lock-in period and no early repayment penalties, you can switch anytime.

This approach gives you the best of both worlds—lower initial down payment and preserved cash reserves, with the option to capture better rates later. Monitor the interest rate trends regularly using Property Search ">Homejourney's real-time SORA tracking to time your refinancing decision perfectly.

For a detailed guide on refinancing, including step-by-step instructions and multi-bank comparison, visit our Property Search ">bank rates page where you can compare current offerings from all major lenders.

Homejourney's Role in Your Decision

At Homejourney, we prioritize your safety and trust by providing verified, transparent information. We help you compare HDB and bank loans by:

Real-time rate comparison: See current rates from DBS, OCBC, UOB, HSBC, Standard Chartered, and more instantly
Eligibility calculator: Calculate your borrowing power and see which loans you qualify for
Multi-bank application: Submit one application and receive offers from all major banks, letting them compete for your business
Singpass integration: Auto-fill your application in seconds for faster approval and less paperwork
Expert guidance: Connect with our Homejourney Mortgage Brokers via our loan application for personalized advice

Start your comparison today at Property Search ">Homejourney's bank rates page to see your options and calculate your borrowing power.

Frequently Asked Questions

Can I switch from an HDB loan to a bank loan later?

Yes, absolutely. HDB loans have no lock-in period or early repayment penalties, making refinancing straightforward. You can switch to a bank loan anytime, especially if rates become significantly lower. Use Homejourney's rate comparison tool to monitor when refinancing makes financial sense.

What's the Total Debt Servicing Ratio (TDSR) and how does it affect my borrowing?

TDSR is the maximum percentage of your gross monthly income that can go toward all debt obligations (mortgage, car loan, credit cards, etc.). Most banks cap this at 60%. For example, if you earn S$5,000 monthly, your total monthly debt cannot exceed S$3,000. This limits how much you can borrow regardless of property price. Calculate your TDSR using Homejourney's eligibility calculator to see your realistic borrowing power.

Is the HDB loan rate really fixed forever?

Yes. The HDB loan rate of 2.6% is fixed for the entire loan tenure, pegged at 0.1% above the CPF OA interest rate. However, the CPF OA interest rate itself can change (adjusted quarterly), but any change affects only the CPF interest you earn, not your HDB loan rate.

What happens if I can't qualify for a bank loan?

If your credit score is weak or your income doesn't meet bank requirements, an HDB loan is your best option. HDB has less stringent credit requirements and focuses more on citizenship and income ceiling eligibility. The stable 2.6% rate also means you won't face payment surprises due to rate fluctuations.

Should I choose based on the lowest interest rate?

Interest rate is important but not the only factor. Consider down payment requirements, flexibility, loan tenure, and your financial stability. A bank loan with a 2% rate but 25% down payment might not be better than an HDB loan with 2.6% rate and 20% down if you have limited cash. Use Homejourney's mortgage calculator to compare the total cost, not just the rate.

Next Steps: Take Action Today

Making the right loan choice is one of the most important financial decisions you'll make. At Homejourney, we're committed to helping you navigate this decision with confidence and clarity.

Here's what to do next: