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 concessionary loan at 2.6% interest or refinance with a bank loan that may offer lower rates starting from 2.20%? The answer depends on your financial situation, risk tolerance, and long-term plans. As of February 2026, bank loans have become increasingly competitive, with many HDB owners refinancing to save thousands on monthly repayments.
At Homejourney, we believe in empowering Singapore homebuyers with transparent, verified information to make confident decisions. This guide compares both options side-by-side so you understand exactly what you're getting into.
Understanding HDB Loans: The Concessionary Option
An HDB loan is a concessionary housing loan offered exclusively by the Housing & Development Board to Singapore citizens buying HDB flats. The term "concessionary" means the government subsidizes the interest rate to make homeownership more affordable for Singaporeans.
The HDB loan interest rate is pegged at 0.1% above the CPF Ordinary Account (OA) rate, which has remained stable at 2.6% per annum for over a decade. This consistency is one of HDB loans' greatest strengths—your monthly repayment stays exactly the same for the entire loan tenure, typically 25-30 years.
Key HDB Loan Features:
- Fixed interest rate: 2.6% p.a. (unchanged since 2015)
- Downpayment: 20% of purchase price (can be 100% CPF)
- Maximum loan: Up to 75% of flat purchase price
- Early repayment penalty: None
- Lock-in period: None
- Late payment fee: 8.1% p.a.
The HDB loan's biggest advantage is predictability. You know exactly what your monthly payment will be in year 1, year 10, and year 25. This makes budgeting straightforward and protects you from interest rate shocks.
Understanding Bank Loans: The Flexible Alternative
Bank loans offer a fundamentally different approach to home financing. Instead of a fixed government-subsidized rate, banks offer either fixed-rate packages (typically 1-3 years) or floating-rate packages pegged to SORA (Singapore Overnight Rate Average).
As of February 2026, bank loan rates have dropped significantly below HDB's 2.6%, with fixed rates starting from 2.20% and floating rates from 2.45%. This rate advantage has prompted many existing HDB borrowers to refinance, with some saving over S$3,500 in the first year alone on a S$350,000 loan.
Key Bank Loan Features:
- Interest rate: From 2.20% p.a. (fixed) or 2.45% p.a. (floating)
- Downpayment: 25% of purchase price (minimum 5% in cash)
- Maximum loan: Up to 75% of bank valuation or purchase price
- Lock-in period: 2-3 years (for fixed-rate packages)
- Early repayment penalty: Yes, during lock-in period
- CPF usage: Up to 20% of downpayment from CPF OA
Bank loans offer flexibility and competitive rates, but come with complexity. Once your fixed-rate period ends, your loan reverts to a floating rate that moves with market conditions—meaning your monthly payment could increase or decrease.
Head-to-Head Comparison: HDB vs Bank Loans
To help you evaluate both options, here's how HDB and bank loans compare across key criteria:
| Criteria | HDB Loan | Bank Loan |
|---|---|---|
| Interest Rate | Fixed at 2.6% p.a. | From 2.20% p.a. (fixed) or 2.45% p.a. (floating) |
| Downpayment | 20% (100% CPF allowed) | 25% (min. 5% cash, up to 20% CPF) |
| Monthly Repayment | Stable and predictable | Stable initially; may fluctuate after lock-in |
| Lock-in Period | None | 2-3 years (for fixed packages) |
| Early Repayment Penalty | None | Yes, during lock-in period |
| Refinancing Flexibility | Can refinance anytime without penalty | Penalties apply during lock-in |
| Credit Score Requirement | Less stringent; citizenship-based | Strict assessment; TDSR framework applies |
| Eligibility | Singapore citizens only | Citizens, PRs, and foreigners (age 21-65) |
Interest Rate Trends: What's Changed in 2026?
The most significant development in Singapore's mortgage market over the past year has been the decline in bank loan rates below HDB's fixed 2.6%. This shift has fundamentally changed the calculus for HDB borrowers.
The chart below shows recent SORA trends to help you understand how bank loan rates have moved:
Over the past decade, HDB rates have remained unchanged at 2.6%, providing stability. In contrast, bank rates have fluctuated with global interest rate trends, moving between 1.5% and 3.5% depending on market conditions. As of February 2026, the gap between HDB and bank rates has widened significantly in banks' favor.
This doesn't mean HDB loans are now a bad choice. Rather, it means bank loans have become more attractive for those who can qualify and are comfortable with the added complexity. For conservative buyers prioritizing certainty over savings, HDB loans remain a solid option.
Who Should Choose an HDB Loan?
HDB loans are ideal for buyers who prioritize simplicity, stability, and peace of mind over maximum savings. Consider an HDB loan if:
- You want payment certainty: Your monthly payment never changes, making long-term budgeting predictable
- You're a first-time buyer: HDB loans have simpler eligibility requirements and less stringent credit assessment
- You have limited CPF savings: HDB allows 100% CPF for the downpayment, while banks require at least 5% cash
- You plan to stay in the flat long-term: The lack of lock-in periods and early repayment penalties gives you flexibility
- You're risk-averse: You prefer not to worry about interest rate fluctuations or refinancing complexity
- Your credit score isn't stellar: HDB loans don't require strict credit assessment like banks do
If you fall into these categories, the HDB loan's stability and accessibility may outweigh the potential savings from a bank loan.
Who Should Consider a Bank Loan?
Bank loans make sense for buyers who are comfortable with complexity and want to minimize interest costs. Consider a bank loan if:
- You want to save on interest: Bank rates are currently 0.4-0.6% lower than HDB's 2.6%, translating to significant savings over 25 years
- You have strong credit and income: Banks assess creditworthiness strictly; if you qualify, you'll likely get competitive rates
- You understand SORA and rate risk: You're comfortable with the possibility that rates could rise after your fixed-rate period ends
- You're refinancing an existing HDB loan: Many HDB owners are refinancing to bank loans to capitalize on lower rates
- You're a PR or foreigner: Bank loans are available to non-citizens; HDB loans are not
- You have a higher income: Banks can lend up to 75% LTV like HDB, but may offer better rates to higher-income borrowers
If you're refinancing an existing HDB loan, the math often strongly favors switching to a bank loan. For example, refinancing a S$350,000 loan from HDB's 2.6% to a bank's 2.2% fixed rate could save you over S$3,500 in year one alone.
The Real Cost Comparison: Calculating Your Savings
Numbers matter. Let's look at a realistic example to show the difference between HDB and bank loans.
Scenario: Buying a resale HDB flat for S$500,000
- HDB loan: S$400,000 at 2.6% over 25 years = S$1,893/month
- Bank loan: S$400,000 at 2.2% over 25 years = S$1,769/month
- Monthly savings: S$124
- Annual savings: S$1,488
- Total savings over 25 years: S$37,200 (before accounting for rate changes)
These savings are substantial, but they assume the bank loan's rate stays at 2.2% for the entire tenure. In reality, after the 3-year fixed period, your rate may adjust. If SORA rises to 3.5%, your monthly payment could jump to S$2,100+, erasing previous savings.
This is why your risk tolerance matters. Conservative buyers might prefer HDB's certainty. Aggressive savers might prefer the bank loan's upside potential.
Downpayment Requirements: A Critical Difference
One often-overlooked difference is the downpayment requirement. HDB loans require 20% downpayment, while bank loans require 25%. For a S$500,000 flat:
- HDB downpayment: S$100,000
- Bank downpayment: S$125,000
However, HDB allows 100% of the downpayment to come from CPF OA savings, while banks require at least 5% in cash. If you're low on cash but have substantial CPF savings, an HDB loan is more accessible.
At Homejourney, we recommend using our mortgage eligibility calculator to see how much you can borrow under both HDB and bank loan scenarios. This takes the guesswork out of downpayment planning.
Credit Score and Eligibility: Who Qualifies?
HDB and bank loans have fundamentally different eligibility requirements.
HDB Loan Eligibility:
- Must be a Singapore citizen
- Annual household income ceiling (varies by flat type; typically S$14,000/month for 4-room flats)
- No requirement for excellent credit score
- Assessed on citizenship, income, and property ownership status
Bank Loan Eligibility:
- Available to Singapore citizens, PRs, and foreigners (age 21-65)
- Strict credit assessment and credit score evaluation
- Total Debt Servicing Ratio (TDSR) framework: your total monthly debt cannot exceed 60% of gross monthly income
- Banks assess income stability, employment history, and existing debt
If your credit score is below average or you have existing debts, an HDB loan is more accessible. If you're a PR or foreigner, a bank loan is your only option.
