HDB Loan vs Bank Loan: Which Should You Choose?
When buying your first HDB flat in Singapore, one of the most important decisions you'll make is choosing between an HDB loan and a bank loan. As of January 2026, bank mortgage rates have dropped to 3-year lows and are now generally lower than HDB's fixed 2.6% rate, making this comparison more critical than ever.[4][6] The right choice depends on your financial situation, risk tolerance, and long-term plans—but the difference can save you tens of thousands of dollars over 25 years.
At Homejourney, we believe first-time buyers deserve transparent, trustworthy guidance to make confident decisions. This guide breaks down the key differences between HDB and bank loans, helping you understand which option truly suits your circumstances.
Understanding HDB Loans
An HDB loan is a housing loan offered directly by the Housing & Development Board for purchasing HDB flats. It's specifically designed for Singaporean citizens buying their first or second property.[1] The HDB loan has remained remarkably stable, with a fixed interest rate of 2.6% per annum for over a decade, pegged at just 0.1% above the CPF Ordinary Account (OA) interest rate.[4]
The key advantage of this stability is predictability. Your monthly repayments never change, making it easier to budget and plan your finances over the 25-year loan tenure.[1] This consistency has made HDB loans a cornerstone of affordable housing in Singapore, where over 80% of the population lives in HDB flats.
HDB Loan Key Features
- Interest Rate: Fixed at 2.6% p.a.[1]
- Downpayment: 20% of purchase price (can be paid entirely using CPF OA funds)[1]
- Loan-to-Value (LTV): Up to 80% of property value[1]
- Maximum Tenure: 25 years[3]
- Lock-in Period: None—you can refinance anytime without penalty[1]
- Early Repayment Penalty: None[1]
- Property Eligibility: HDB flats only[1]
- Borrower Eligibility: Singapore citizens with stricter income ceiling and property ownership requirements[1]
Understanding Bank Loans
Bank loans are housing loans offered by financial institutions regulated by the Monetary Authority of Singapore (MAS). Unlike HDB loans, bank loans can be used for both HDB flats and private properties, and they offer more flexibility in terms of interest rate structures.[1] As of May 2025, bank mortgage rates have decreased significantly and are now generally lower than HDB's 2.6% rate, presenting a compelling opportunity for cost-conscious buyers.[4]
Bank loans typically come in two varieties: fixed-rate packages (usually 1-5 years) and floating-rate packages pegged to benchmarks like SORA (Singapore Overnight Rate Average).[2] This flexibility means you can lock in lower rates during favorable market conditions, but it also introduces interest rate risk once your fixed period ends.
Bank Loan Key Features
- Interest Rate: From 2.20% p.a. (variable, depending on market conditions and bank)[2]
- Downpayment: 25% of purchase price (minimum 5% in cash)[1]
- Loan-to-Value (LTV): Up to 75% of property value[1]
- Maximum Tenure: Up to 30 years for HDB flats[3]
- Lock-in Period: 2-3 years for fixed rates[2]
- Early Repayment Penalty: Usually 1.5% of loan amount during lock-in period[1]
- Property Eligibility: Both HDB flats and private properties[1]
- Borrower Eligibility: Singapore citizens, PRs, and foreigners aged 21-65 (less strict credit requirements)[2]
Head-to-Head Comparison
To help you make an informed decision, here's how HDB and bank loans stack up across critical factors:
| Factor | HDB Loan | Bank Loan |
|---|---|---|
| Interest Rate | Fixed at 2.6% p.a. | From 2.20% p.a. (variable) |
| Downpayment | 20% (fully CPF-eligible) | 25% (min. 5% cash) |
| LTV Limit | Up to 80% | Up to 75% |
| Maximum Tenure | 25 years | 30 years |
| Lock-in Period | None | 2-3 years (for fixed rates) |
| Early Repayment Penalty | None | Usually 1.5% during lock-in |
| Refinancing Flexibility | Can refinance anytime | More complex, penalties apply |
The Real Cost Difference: Interest Rates Matter
While HDB loans offer simplicity and stability, the interest rate difference is substantial. On a typical S$350,000 HDB flat purchase with an 80% loan (S$280,000), switching from an HDB loan to a bank loan could save you approximately S$3,500 in the first year alone.[5] Over a 25-year tenure, this compounds significantly.
