HDB Loan vs Bank Loan: Which Should First-Time Buyers Choose?
For first-time home buyers in Singapore, the choice between an HDB loan and a bank loan is one of the most important financial decisions you'll make. While HDB loans offer fixed stability at 2.6% interest with minimal cash requirements, bank loans now present competitive rates as low as 1.4% with greater flexibility[1][3]. The right choice depends entirely on your financial situation, risk tolerance, and long-term plans.
At Homejourney, we believe in empowering buyers with transparent, verified information so you can make confident decisions about your first property purchase. This guide breaks down the key differences and helps you evaluate which loan type aligns with your goals.
Understanding HDB Loans: Stability and Accessibility
An HDB loan is a concessionary loan offered by the Housing & Development Board specifically to help Singapore citizens afford HDB flats[1]. The term "concessionary" means you receive favorable terms below market rates.
Key HDB Loan Features:
- Fixed interest rate of 2.6% per annum, pegged at 0.1% above the CPF Ordinary Account (OA) rate[1][2]
- Downpayment of 20% (or 25% for resale flats), fully payable using CPF-OA savings[1][2]
- Up to 75% Loan-to-Value (LTV) limit[1]
- Maximum loan tenure of 25 years[2]
- No early repayment penalties[1]
- No lock-in period[1]
The HDB loan's greatest strength is its predictability. Over the past decade, the rate has remained constant at 2.6%, meaning your monthly repayments never change[3]. This makes budgeting straightforward and eliminates the risk of payment shock from rate increases.
However, HDB loans come with strict eligibility requirements. You must be a Singapore citizen, meet income ceiling limits based on flat type, and satisfy other criteria set by HDB. Additionally, you can only use an HDB loan for HDB flats or Executive Condominiums—not private properties.
Understanding Bank Loans: Flexibility and Potential Savings
Bank loans are offered by financial institutions like DBS, OCBC, UOB, HSBC, Standard Chartered, and others[1]. These loans come in two main varieties: fixed-rate and floating-rate packages.
Key Bank Loan Features:
- Interest rates starting from 1.4% to 2.2%, significantly lower than HDB's 2.6%[1][3]
- Downpayment of 25%, with minimum 5% in cash and up to 20% from CPF-OA[1][2]
- Up to 75% LTV limit[1][2]
- Maximum loan tenure of 30 years for HDB flats and Executive Condominiums[2]
- Fixed-rate periods typically 1-3 years, then reverting to floating rates[1]
- Early repayment penalties during lock-in period[1]
Bank loans offer flexibility and potential cost savings. As of January 2026, bank mortgage rates have decreased and are now generally lower than the HDB concessionary rate[3][5]. For example, a three-year fixed rate from POSB is approximately one percentage point lower than HDB's 2.6%[4]. On a S$350,000 loan, this could save you roughly S$3,500 in the first year[4].
However, this flexibility comes with complexity and risk. Once your fixed-rate period ends, your loan reverts to a floating rate pegged to SORA (Singapore Overnight Rate Average), which fluctuates with market conditions[1][3]. This means your monthly repayments could increase significantly.
Bank loans also require stricter credit assessment. Banks evaluate your credit history, gross monthly income, income stability, and existing debt under the Total Debt Servicing Ratio (TDSR) framework[1].
Comparing Downpayment Requirements: Cash vs CPF
One of the most significant differences for first-time buyers is the downpayment structure. This often determines which loan type is more accessible for you.
HDB Loan Downpayment:
- Minimum 20% (or 25% for resale flats) of purchase price[1][2]
- Entire downpayment can be paid using CPF-OA savings[1]
- No cash requirement if you have sufficient CPF balance[1]
Bank Loan Downpayment:
- Minimum 25% of purchase price[1][2]
- At least 5% must be paid in cash[1][2]
- Remaining 20% can be paid in cash or CPF-OA[1][2]
This difference is crucial. If you're cash-light but CPF-rich, an HDB loan makes homeownership far more accessible[1]. Many first-time buyers in their late 20s and early 30s have accumulated CPF savings but limited liquid cash. An HDB loan allows you to use these CPF savings for the entire downpayment, removing the barrier of needing S$17,500 in cash for a S$350,000 property.
Conversely, if you have strong cash reserves and prefer flexibility, a bank loan's higher downpayment requirement may be manageable.
Interest Rate Comparison: Current Market Rates
Interest rates are the most visible difference between HDB and bank loans, and they significantly impact your total cost of ownership.
HDB Loan Rates: Fixed at 2.6% per annum, unchanged for over two decades[3]
Bank Loan Rates: Currently ranging from 1.4% to 2.2% per annum for fixed-rate periods[1][3]
The chart below shows recent interest rate trends in Singapore to help you understand how rates have moved:
As you can see, bank rates have fallen significantly and now sit below HDB's fixed rate. However, this comparison requires nuance. Bank loans typically offer low introductory rates for 1-3 years, after which they revert to floating rates pegged to SORA[1][3]. SORA rates fluctuate based on market conditions, meaning your rate could increase substantially after the lock-in period.
HDB's 2.6% rate, while higher than current bank introductory rates, provides certainty. You know exactly what you'll pay for the entire loan tenure. This stability is valuable for budgeting and financial planning[1].
To understand your true borrowing costs, use Homejourney's mortgage calculator to compare total interest paid over the full loan tenure under different rate scenarios. You can also compare rates from DBS, OCBC, UOB, HSBC, Standard Chartered, and other major banks instantly on Bank Rates to see current offers.
Eligibility: Who Qualifies for Each Loan Type?
Eligibility is a critical factor that may determine which loan option is available to you.
HDB Loan Eligibility:
- Must be a Singapore citizen[1][2]
- Must meet income ceiling limits (varies by flat type and family size)[1]
- Cannot own another property[1]
- Age requirements apply[1]
- No credit score requirement—eligibility depends more on citizenship, income, and property ownership status[1]
Bank Loan Eligibility:
