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 refinance with a bank loan? The answer depends on your financial situation, risk tolerance, and long-term plans. In 2026, with HDB loans fixed at 2.6% per annum and bank loans ranging from 1.4% to 3% per annum, the choice has become more nuanced than ever.

This Homejourney guide breaks down the key differences between HDB and bank loans, helping you understand which option truly saves you more money and aligns with your property goals. We prioritize transparency and accuracy so you can make confident decisions about your home financing.

Understanding the Core Differences Between HDB and Bank Loans

An HDB loan is a concessionary loan offered by the Housing & Development Board specifically for HDB flat purchases. The interest rate is pegged at 0.1% higher than the CPF Ordinary Account (OA) interest rate, meaning it adjusts quarterly but remains stable and predictable. This differs fundamentally from bank loans, which are market-driven products subject to interest rate fluctuations.

A bank loan is a commercial mortgage product offered by financial institutions regulated by the Monetary Authority of Singapore. Banks offer both fixed-rate packages (typically 1-3 years) and floating-rate packages pegged to benchmarks like SORA (Singapore Overnight Rate Average). The flexibility comes at a cost: complexity and market risk.

Understanding these differences is essential because they directly impact your monthly repayments, total interest paid, and financial flexibility over the loan tenure. Homejourney's approach is to help you evaluate both options transparently, considering your specific circumstances rather than pushing you toward one choice.

Interest Rates: The Most Significant Factor in Your Decision

The interest rate is often the deciding factor between HDB and bank loans. Currently, HDB loans are fixed at 2.6% per annum—a rate that has remained unchanged since 1999. This stability means your monthly repayments remain consistent throughout your loan tenure, making budgeting predictable.

Bank loans, by contrast, typically range from 1.4% to 3% per annum depending on the product type and current market conditions. During fixed-rate periods (usually 1-3 years), rates may be lower than HDB's 2.6%, but once the fixed period expires, rates revert to floating rates pegged to SORA, which fluctuates with market conditions.

The chart below shows recent interest rate trends in Singapore to help you understand how SORA-linked rates have moved compared to HDB's fixed rate:

For a typical S$350,000 loan, switching from an HDB loan to a three-year fixed bank loan at lower rates could save approximately S$3,500 in the first year alone. However, this calculation changes significantly once the fixed period ends and rates adjust upward.

Down Payment Requirements: Cash Flow Impact

One of the most practical differences between HDB and bank loans lies in down payment requirements. This directly affects how much cash you need upfront—money that could otherwise be used for renovations, furnishings, or investments.

HDB Loan Down Payment:

Minimum 20% of purchase price (some sources cite 15%, but current regulations specify 20%)
Can be paid entirely using CPF OA savings
No mandatory cash component required
Maximum loan-to-value (LTV) ratio: 80%

Bank Loan Down Payment:

25% of purchase price required
Minimum 5% must be paid in cash
Remaining 20% can be paid using CPF OA or cash
Maximum LTV ratio: 75%

For a S$500,000 four-room HDB flat, this difference is substantial. With an HDB loan, you could pay S$100,000 entirely from CPF, preserving S$25,000 in cash. With a bank loan, you must pay at least S$25,000 in cash upfront, reducing your liquidity for other housing-related expenses.

This is particularly important for first-time buyers who may have limited savings. Homejourney's property search feature helps you find flats within your budget, and our mortgage eligibility calculator shows exactly how much you can borrow under each loan type.

Loan-to-Value Ratios and Maximum Borrowing Power

The LTV ratio determines how much you can borrow relative to your property's value. HDB loans offer a higher LTV of 80%, while bank loans cap at 75%. This 5% difference translates to meaningful borrowing power differences.

On a S$500,000 property:

HDB Loan: Borrow up to S$400,000 (80% LTV)
Bank Loan: Borrow up to S$375,000 (75% LTV)

If you're stretching your budget to purchase a property, the HDB loan's higher LTV provides additional borrowing capacity. However, this advantage must be weighed against the higher interest rate you'll pay on that additional borrowed amount.

Stability vs. Flexibility: Which Matters More to You?

HDB loans prioritize stability. Your interest rate never changes, your monthly repayment remains constant, and you can plan your finances with certainty. This is invaluable if you prefer predictable budgeting and want to avoid surprises from interest rate increases.

Bank loans offer flexibility. You can refinance without penalties, lock in lower rates during favorable market conditions, and switch between fixed and floating rates. However, this flexibility comes with complexity and the risk that rates could increase significantly after your fixed period ends.

First-time buyers and conservative investors typically benefit from HDB's stability. Experienced homeowners who understand market cycles and can time refinancing decisions often benefit from bank loans' flexibility.

Early Repayment and Lock-In Periods

HDB Loan Benefits:

No lock-in period—you can repay early anytime
No early repayment penalties
Can refinance to a bank loan without restrictions

Bank Loan Restrictions:

Lock-in period typically 2-3 years
Early repayment penalty usually 1.5% of the loan amount during lock-in
After lock-in period, you can refinance more freely

If you anticipate receiving a bonus, inheritance, or salary increase that could allow early repayment, an HDB loan's flexibility becomes valuable. Conversely, if you're confident in your stable income and want to lock in a lower rate, bank loans' lock-in periods are less problematic.

Eligibility Requirements: Who Qualifies?

HDB Loan Eligibility (Stricter):

Must be a Singapore citizen
Subject to income ceiling limits (varies by household size)
Cannot own another property
Must meet HDB's ownership requirements

Bank Loan Eligibility (More Flexible):

Singapore citizens, PRs, and foreigners aged 21-65 can apply
No income ceiling restrictions
Evaluated based on credit score and Total Debt Servicing Ratio (TDSR)
Can own multiple properties

If you're a PR, foreigner, or high-income earner exceeding HDB's income ceiling, a bank loan is your only option. If you're a citizen below the income ceiling, both options are available, and you should choose based on financial factors rather than eligibility constraints.

Combining HDB Loans with Grants: Maximizing Your Financing

One significant advantage of HDB loans is their compatibility with government housing grants. First-time HDB buyers may qualify for grants that reduce the purchase price directly, making the HDB loan smaller from the start.

Key HDB Grants to Consider:

Enhanced Housing Grant (EHG): Up to S$80,000 for new flats, depending on income and flat type
Proximity Housing Grant (PHG): Up to S$20,000 if buying near parents or adult children
CPF Housing Grant (for second-timer): Up to S$40,000 for eligible second-time buyers

These grants directly reduce the purchase price, meaning you borrow less and pay less interest over the loan tenure. For example, an S$80,000 EHG effectively reduces a S$400,000 flat to S$320,000, saving significant interest costs.

Bank loans don't offer equivalent grants, though some banks provide promotional rates for new customers. Homejourney's guide on Maximize HDB Grants & Financing: Homejourney Ultimate Guide ">maximizing HDB grants and financing provides detailed calculations showing how grants impact your total loan cost.

Total Cost Comparison: A Real-World Example

Let's calculate the total interest paid over 25 years for a S$400,000 loan (S$500,000 flat with 20% down payment):

HDB Loan at 2.6% p.a.:

Monthly repayment: S$1,875
Total repaid: S$562,500
Total interest: S$162,500

Bank Loan at 2.0% p.a. (3-year fixed, then SORA):

First 3 years at 2.0%: S$1,822/month
After 3 years, assume rate increases to 3.0%: S$1,950/month
Total interest (estimated): S$145,000-S$160,000 (depending on future SORA movement)

In this scenario, a bank loan could save S$2,500-S$17,500 in total interest, but only if rates don't spike significantly after the fixed period. If SORA increases to 4% or higher, the HDB loan becomes more economical.

The key insight: bank loans offer savings potential during favorable rate environments, but HDB loans provide protection against rate increases. Your choice depends on your risk tolerance and interest rate outlook.

Refinancing Strategy: The Hybrid Approach

Many savvy Singapore homeowners use a hybrid strategy: start with an HDB loan for stability, then refinance to a bank loan when rates fall significantly below 2.6%. This approach captures the benefits of both products.

In 2026, with some bank loans available at 1.4-2.0%, refinancing from HDB to bank loans has become increasingly attractive. However, consider these refinancing costs:

Legal fees: S$800-S$1,500
Valuation fees: S$300-S$500
Processing fees: S$200-S$500
Total: S$1,300-S$2,500

The refinancing break-even point depends on your loan amount and the interest rate difference. For a S$400,000 loan, a 0.6% rate reduction (from 2.6% to 2.0%) saves approximately S$2,400 annually, meaning refinancing costs are recovered in about 6-10 months.

Homejourney's bank rates comparison tool lets you see current refinancing offers from DBS, OCBC, UOB, HSBC, Standard Chartered, and other major banks, helping you identify when refinancing makes financial sense.

Using Homejourney to Compare and Apply for Loans

Making the right loan choice requires accurate information about current rates, your borrowing capacity, and available options. Homejourney simplifies this process through several integrated tools:

Bank Rates Comparison: View real-time rates from all major Singapore banks in one place. Compare HDB loan alternatives side-by-side with current bank offerings, including fixed and floating rate packages.

Mortgage Eligibility Calculator: Input your income, existing debts, and property price to instantly see how much you can borrow under HDB and bank loan schemes. This calculation accounts for TDSR limits and CPF availability.

Multi-Bank Application: Submit one application through Homejourney and receive offers from multiple banks simultaneously. This competitive process encourages banks to offer you their best rates.

Singpass Integration: Auto-fill your application using Singpass/MyInfo, reducing paperwork and accelerating approval timelines.

Visit Homejourney's bank rates page to compare current offerings and calculate your borrowing capacity. Our mortgage brokers are available to provide personalized guidance based on your specific situation.