HDB Loan vs Bank Loan 2026: Which Financing Option Saves You More?

When purchasing an HDB flat in Singapore, you face a critical decision: should you take an HDB loan or a bank loan? The answer depends on your financial situation, eligibility, and long-term goals. While HDB loans offer stability and flexibility, bank loans increasingly provide lower interest rates that can save you tens of thousands of dollars over 25-30 years. In 2026, the gap between HDB and bank loan rates has widened, making this comparison more important than ever.

At Homejourney, we prioritize helping you make informed decisions with verified, transparent information. This guide breaks down the key differences between HDB and bank loans, helping you understand which option aligns with your financial situation and property goals.

HDB Loan vs Bank Loan: The Core Differences

Both HDB and bank loans serve the same purpose—financing your HDB flat purchase—but they operate under different terms, rates, and eligibility requirements. Understanding these differences is essential before committing to either option.

HDB loans are concessionary loans offered directly by the Housing & Development Board to Singapore citizens. The interest rate is pegged at 0.1% higher than the CPF Ordinary Account (OA) interest rate, currently standing at 2.6% per annum.[1] This rate is fixed and adjusted quarterly (January, April, July, October) based on CPF interest rate revisions.

Bank loans are offered by financial institutions regulated by the Monetary Authority of Singapore (MAS). These loans typically feature variable interest rates ranging from 1.2% to 3% per annum, depending on the bank, loan structure, and current market conditions.[1] Many banks also offer fixed-rate packages for 1-3 years before reverting to floating rates pegged to SORA (Singapore Overnight Rate Average).

Interest Rates: The Most Critical Factor

Interest rate is often the deciding factor between HDB and bank loans. While HDB's 2.6% rate appears straightforward, bank loans can offer significantly lower rates—sometimes 0.4% to 1.4% lower depending on market conditions and your creditworthiness.

The chart below shows recent interest rate trends in Singapore to help you understand how SORA and bank rates have evolved:

To illustrate the impact: on a S$350,000 loan over 25 years, switching from an HDB loan at 2.6% to a bank loan at 2.2% could save you approximately S$3,500 in the first year alone.[4] Over the full loan tenure, these savings compound significantly.

However, bank loan rates fluctuate with market conditions. Once your fixed-rate period ends (typically 2-3 years), your rate may increase, affecting your monthly repayments. HDB rates, while higher, remain stable and predictable—a significant advantage for budgeting and financial planning.

Down Payment Requirements: CPF vs Cash

The down payment structure differs substantially between HDB and bank loans, directly affecting how much cash you need to keep on hand.

HDB Loan Down Payment:[1][3]

Minimum 20% of purchase price (updated from previous 25%)
Can be paid entirely using CPF Ordinary Account (OA) funds
Alternatively, pay using cash, CPF, or a combination of both
Maximum loan amount: 80% of purchase price (subject to CPF balance)

Bank Loan Down Payment:[1][3]

25% of purchase price required
Minimum 5% must be paid in cash
Remaining 20% can be paid using cash, CPF OA, or a combination
Maximum loan amount: 75% of purchase price or bank valuation (whichever is lower)

For a typical 4-room HDB flat priced at S$400,000, this difference is substantial. With an HDB loan, you could pay 20% (S$80,000) entirely from CPF. With a bank loan, you'd need at least S$20,000 in cash (5% of S$400,000) plus another S$80,000 from CPF or cash. This means bank loans require significantly more liquid cash reserves, which you might prefer to allocate toward renovations, furnishings, or emergency savings.

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

LTV limits determine the maximum percentage of your property's value you can borrow. Higher LTV limits allow you to borrow more with a smaller down payment, though this also means higher total interest paid over time.

HDB Loan: Up to 80% LTV (subject to CPF balance availability)[1][3]

Bank Loan: Up to 75% LTV[1][3]

The 5% difference may seem minor, but it has real implications. On a S$400,000 flat, HDB's 80% LTV allows you to borrow S$320,000, while a bank's 75% LTV limits you to S$300,000. This 5% gap matters most for first-time buyers with limited CPF savings, as HDB loans provide more flexibility to borrow against your CPF balance.

Early Repayment and Lock-In Periods

Life circumstances change. You might want to refinance to a lower rate, pay off your loan early, or upgrade to a larger property. How flexible is each loan option?

HDB Loans:[1]

No lock-in period
No penalty for early repayment
Can refinance to a bank loan at any time without restrictions
Provides maximum flexibility for changing circumstances

Bank Loans:[1]

Typically 2-3 year lock-in period for fixed-rate packages
Early repayment penalty of approximately 1.5% of the loan amount during lock-in
After lock-in period, you can refinance with minimal penalties

This flexibility advantage favors HDB loans significantly. If you secure a bank loan at 2.2% but rates drop to 1.8%, you're locked in and cannot refinance without paying a penalty. With an HDB loan, you could refinance to that better bank rate immediately.

Eligibility Requirements: Who Qualifies?

Not everyone qualifies for both loan types. Understanding eligibility criteria is crucial before deciding which path to pursue.

HDB Loan Eligibility:[2]

Must be a Singapore citizen
Subject to income ceiling (varies by flat type and family composition)
Cannot own another property
Less dependent on credit score; more focused on citizenship and income

Bank Loan Eligibility:[2]

Singapore citizens, PRs, and foreigners aged 21-65 years old
No income ceiling restrictions
Stricter credit assessment based on credit history and Total Debt Servicing Ratio (TDSR)
Must meet banks' own lending criteria
Can own other properties

If you're a Singapore citizen with a moderate income and no other properties, you likely qualify for both. However, if your income exceeds HDB's ceiling or you own another property, bank loans become your only option. Conversely, if your credit score is weak, HDB loans are more accessible since they don't require the stringent credit assessment banks conduct.

Comparing Monthly Repayments and Total Interest Paid

The real-world impact of choosing between HDB and bank loans becomes clear when you calculate actual monthly repayments and total interest over the loan tenure.

Example Scenario: S$350,000 HDB Flat, 25-Year Loan Tenure

HDB Loan (2.6% p.a.):

Monthly repayment: Approximately S$1,635
Total interest paid: Approximately S$140,500

Bank Loan (2.2% p.a., fixed for 3 years, then floating):

Monthly repayment (first 3 years): Approximately S$1,548
Total interest paid (estimate): Approximately S$120,000-S$135,000 (depending on floating rate after year 3)

In this scenario, the bank loan saves you S$87 per month initially, totaling over S$3,100 in the first year. Over 25 years, assuming rates don't spike dramatically, you could save S$5,500-S$20,500 in total interest—money you could redirect toward investments, property upgrades, or retirement savings.

Should You Refinance from HDB to a Bank Loan?

Many HDB homeowners with existing HDB loans are now refinancing to bank loans as interest rates have fallen. In 2026, this trend continues as banks compete aggressively for refinancing business.

When refinancing makes sense:

Bank loan rates are at least 0.5% lower than your HDB rate
You have sufficient equity and stable income to qualify
You plan to stay in your property for at least 5+ more years (to recover refinancing costs)
Your credit score is good to excellent

When refinancing doesn't make sense:

Bank rates are only marginally lower (less than 0.3%)
You're nearing the end of your loan tenure (refinancing costs outweigh savings)
Your credit score is weak or income is unstable
You may sell or upgrade within 3-5 years

At Homejourney, we help you compare current rates from all major banks—DBS, OCBC, UOB, HSBC, Standard Chartered, and more—to determine if refinancing is worthwhile. Our bank rates comparison tool shows real-time rates and allows you to calculate potential savings instantly.

Making Your Decision: HDB or Bank Loan?

Choosing between HDB and bank loans depends on your priorities:

Choose an HDB loan if you:

Prioritize payment stability and predictability
Have limited cash reserves and prefer to use CPF for down payment
Want maximum flexibility with no lock-in period or early repayment penalties
Prefer simpler application processes with less stringent credit checks
Plan to potentially refinance to a bank loan later if rates drop further

Choose a bank loan if you:

Have a strong credit score and stable income
Can afford the 25% down payment with 5% in cash
Want to minimize total interest paid over the loan tenure
Are comfortable with potential rate fluctuations after the fixed-rate period
Don't need the flexibility of early repayment without penalties

For most first-time HDB buyers, an HDB loan provides a safer starting point due to lower down payment requirements and greater flexibility. As your financial situation strengthens, you can always refinance to a bank loan to capture lower rates.

Using Homejourney to Compare and Apply

Making this decision shouldn't be complicated. At Homejourney, we've built tools specifically to help you navigate HDB and bank loan options:

Compare Rates Instantly: Our bank rates page displays current rates from all major Singapore banks in one place. See how DBS, OCBC, UOB, and others compare in real-time.

Calculate Your Borrowing Power: Use our mortgage eligibility calculator to understand how much you can borrow from each bank based on your income, existing debts, and CPF balance. This helps you make realistic decisions about property prices within your budget.

Apply via Multiple Banks Simultaneously: Instead of visiting each bank individually, submit one application through Homejourney and receive offers from multiple lenders. Banks then compete for your business, often resulting in better rates and terms.

Singpass Integration: Authenticate using Singpass to auto-fill your application with your personal and financial data. This speeds up approval and reduces paperwork.

For comprehensive guidance on HDB financing, explore our related guides on HDB BTO Financing Complete Guide 2026 | Homejourney ">HDB BTO financing, How to Use CPF for HDB Down Payment: Homejourney's 2026 Guide ">using CPF for down payments, and HDB Loan Interest Rate Trends Analysis 2026 | Homejourney ">HDB loan interest rate trends.

FAQ: HDB Loan vs Bank Loan 2026

Q: Is an HDB loan always cheaper than a bank loan?

A: No. While HDB loans offer stability, bank loans currently offer lower interest rates in most cases. A 2.2% bank loan is cheaper than a 2.6% HDB loan over the loan tenure, despite higher down payment requirements. Use our calculator to compare total costs for your specific situation.

Q: Can I refinance from an HDB loan to a bank loan later?

A: Yes. HDB loans have no lock-in period, allowing you to refinance to a bank loan at any time without penalties. Many homeowners do this when bank rates drop significantly below 2.6%.

Q: What's the minimum down payment I need for each loan?