Switch from HDB Loan to Bank Loan: Should You Do It in 2026? Homejourney's Complete Guide
If you're a Singapore homeowner with an HDB loan at 2.6% interest, you've likely noticed that bank loan rates have dropped significantly below this level. As of January 2026, many banks are offering fixed-rate mortgages starting from 2.28% and floating rates from 2.45%—making the decision to refinance increasingly attractive. But is switching from your HDB loan to a bank loan the right move for your financial situation?
This comprehensive guide from Homejourney—Singapore's trusted platform for property and mortgage guidance—walks you through everything you need to know about converting your HDB loan to a bank loan. We'll break down the financial implications, eligibility requirements, application process, and help you determine whether refinancing makes sense for your circumstances.
Executive Summary: Key Takeaways
The bottom line: Switching from an HDB loan to a bank loan can save you money if current bank rates are significantly lower than 2.6%, but the decision depends on your loan tenure, remaining balance, refinancing costs, and risk tolerance. At Homejourney, we help you compare all available options transparently so you can make the decision that's right for you.
- Potential savings: Switching to a 1.6% fixed-rate bank loan from a 2.6% HDB loan could save approximately S$3,500 in the first year on a S$350,000 loan
- Current market advantage: Bank rates are now lower than HDB's concessionary rate for the first time in over a decade
- Refinancing costs: Expect to pay S$1,500–S$3,000 in legal fees, valuation, and processing costs
- Break-even timeline: Most homeowners recoup refinancing costs within 2–3 years through monthly savings
- Risk consideration: Floating-rate packages offer lower initial rates but carry market risk after the fixed period ends
Table of Contents
- Understanding the Difference: HDB vs Bank Loans
- The Current Market Landscape in 2026
- Financial Analysis: Should You Switch?
- Eligibility Requirements for Bank Loans
- Understanding Refinancing Costs
- Step-by-Step Refinancing Process
- Risk Considerations and Market Factors
- Decision Framework: When to Switch
- Frequently Asked Questions
- Next Steps: How Homejourney Supports Your Decision
Understanding the Difference: HDB vs Bank Loans
Before deciding whether to switch, it's essential to understand how HDB loans and bank loans differ fundamentally. These aren't just different interest rates—they represent different philosophies about home financing in Singapore.
HDB Loans: Stability and Accessibility
An HDB loan is a concessionary loan offered by the Housing & Development Board specifically to help Singapore citizens afford their HDB flats. The interest rate is pegged at 0.1% above the CPF Ordinary Account (OA) interest rate, which has remained fixed at 2.6% per annum for over a decade. This stability is the defining characteristic of HDB loans.
Key features of HDB loans include:
- Fixed interest rate: 2.6% per annum (unchanged for 10+ years)
- CPF flexibility: You can use your entire CPF-OA savings for the 25% downpayment, with no cash requirement
- No early repayment penalties: Pay off your loan early without additional charges
- Maximum loan amount: Up to 75% of the flat's purchase price or market valuation (whichever is lower)
- Lenient eligibility: Based primarily on citizenship and income ceiling, not credit scores
The HDB loan's greatest strength is predictability. Your monthly repayment remains constant throughout the entire loan tenure, making budgeting straightforward and protecting you from market volatility.
Bank Loans: Flexibility with Market Risk
Bank loans, by contrast, offer more flexibility but introduce market risk. Banks provide either fixed-rate packages (typically 1–3 years) or floating-rate packages pegged to benchmarks like SORA (Singapore Overnight Rate Average).
Key features of bank loans include:
- Competitive rates: Currently from 2.28% (fixed) to 2.45% (floating) as of January 2026
- Rate options: Choose between fixed rates for certainty or floating rates for potential savings
- Higher downpayment requirement: 25% of purchase price, with minimum 5% in cash
- Lock-in periods: Typically 2–3 years with early repayment penalties during this period
- Stricter eligibility: Credit assessment, TDSR (Total Debt Servicing Ratio) evaluation, and income verification required
- Greater flexibility: After lock-in period, you can refinance or switch packages more easily
The bank loan's advantage is flexibility and potentially lower rates, but this comes with the trade-off of payment volatility and market exposure.
The Current Market Landscape in 2026
Understanding the current market context is crucial for making an informed refinancing decision. For the first time in over a decade, bank loan rates have fallen below the HDB concessionary rate of 2.6%.
Recent Rate Trends
As of January 2026, major Singapore banks are offering home loan rates significantly lower than the HDB rate. DBS, OCBC, UOB, HSBC, and Standard Chartered all have competitive packages available. Fixed-rate packages typically range from 2.28% to 2.50%, while floating-rate packages start from 2.45%.
This represents a substantial shift from the historical norm. Over the past decade, HDB's 2.6% rate remained relatively stable while bank rates fluctuated with global interest rate cycles. The current rate environment reflects the broader trend of declining interest rates globally, as central banks have eased monetary policy.
The chart below shows recent SORA trends and how bank rates have moved relative to the HDB rate:
This chart illustrates why many HDB homeowners are now actively reviewing their refinancing options. The sustained gap between bank rates and the HDB rate creates a genuine opportunity for savings.
Refinancing Activity Surge
Singapore banks have reported a significant increase in refinancing applications from HDB homeowners. This trend reflects both the attractive rate differential and growing awareness among homeowners that switching is now financially viable. At Homejourney, we've observed increased interest in our Bank Rates comparison tool, where users can instantly compare rates from all major lenders.
Financial Analysis: Should You Switch?
The decision to switch from an HDB loan to a bank loan ultimately comes down to numbers. Let's work through the financial analysis step by step.
Calculating Your Potential Savings
To determine if refinancing makes financial sense, you need to compare three key factors:
- Monthly payment savings from the lower interest rate
- Total refinancing costs (legal fees, valuation, processing fees)
- Time remaining on your current loan
Example calculation: Suppose you have a S$350,000 HDB loan at 2.6% with 20 years remaining. If you refinance to a bank loan at 2.0% fixed for 3 years, your analysis would look like this:
- Current HDB monthly payment: S$1,730
- New bank loan monthly payment: S$1,643
- Monthly savings: S$87
- Annual savings (first 3 years): S$1,044
- Total refinancing costs: S$2,000 (estimate)
- Break-even period: Approximately 23 months
- Total savings over 3-year fixed period: S$1,132 (after deducting refinancing costs)
This example shows that even with refinancing costs, most homeowners recoup their investment within 2–3 years. The longer your loan tenure, the more you benefit from the lower rate.
The Impact of Loan Tenure
Your remaining loan tenure significantly affects whether refinancing is worthwhile. Here's why:
If you have 15+ years remaining: Refinancing is generally attractive. Even a 0.5% rate reduction translates to substantial savings over the remaining tenure. The refinancing costs become negligible relative to total savings.
If you have 5–10 years remaining: Refinancing can still be worthwhile, but the analysis becomes more critical. A 0.6% rate reduction is typically needed to justify the costs.
If you have less than 5 years remaining: Refinancing is rarely beneficial. The refinancing costs may exceed the total interest savings, and you'll have limited time to recoup your investment.
Fixed vs Floating Rate Comparison
When refinancing, you'll need to choose between fixed and floating rates. Here's how they compare:
Most homeowners switching from HDB loans choose fixed-rate packages for the first 3 years. This provides immediate savings while maintaining payment certainty—similar to the stability they're accustomed to with HDB loans. After the fixed period ends, you can reassess and potentially refinance again if market conditions improve.
Eligibility Requirements for Bank Loans
Not every HDB homeowner can simply switch to a bank loan. Banks have stricter eligibility criteria than HDB, and understanding these requirements upfront will help you assess your refinancing prospects.
Citizenship and Residency Status
Unlike HDB loans, which are exclusively for Singapore citizens, bank loans are available to:
- Singapore Citizens
- Singapore Permanent Residents (PRs)
- Foreigners (with additional requirements and typically higher rates)
If you're a PR or foreigner with an HDB loan, refinancing to a bank loan may actually be necessary if you plan to sell or refinance in the future. However, eligibility criteria and rates may be less favorable than for citizens.
Credit Assessment and Credit Score
This is where bank loans differ significantly from HDB loans. While HDB loans don't require a strong credit score, banks conduct thorough credit assessments. Banks will evaluate:
- Credit history: Payment track record with existing loans and credit cards
- Credit score: While not the only factor, a score of 700+ is generally preferred
- Payment defaults: Any history of late payments or defaults will negatively impact your application
- Existing debt obligations: All outstanding loans, credit cards, and other liabilities are considered
If you've maintained your HDB loan payments consistently and have no major credit issues, you should have no problem meeting banks' credit requirements.
Income and TDSR Requirements
Banks assess your ability to service the new loan using the Total Debt Servicing Ratio (TDSR) framework. TDSR limits your total monthly debt obligations (including the new mortgage) to a maximum of 60% of your gross monthly income.
Example: If your gross monthly income is S$5,000, your maximum total monthly debt servicing is S$3,000. This includes your new mortgage payment plus any existing debts (car loans, credit cards, personal loans, etc.).
Most homeowners switching from HDB to bank loans pass TDSR requirements without issue, since they're typically refinancing an existing loan rather than taking on additional debt. However, if your income has decreased or you've taken on significant additional debt since obtaining your HDB loan, TDSR could be a limiting factor.
Age and Employment Stability
Banks typically require borrowers to be between 21 and 65 years old at the time of application. Some banks extend this to age 70 if the loan will be fully repaid by age 70.
Employment stability is also important. Banks prefer borrowers with stable employment history. If you've recently changed jobs, been self-employed for less than 2 years, or have irregular income, you may face additional scrutiny or higher rates.
Property Valuation
Banks will conduct a property valuation to determine the maximum loan amount. For HDB flats, valuations are typically straightforward and based on recent comparable transactions. The maximum loan amount is 75% of the bank's valuation (or purchase price, whichever is lower).
In most cases, if your HDB loan was approved at 75% LTV, the bank's valuation will support a similar LTV for refinancing. However, if your flat's value has decreased or if the bank's valuation is conservative, you might be offered a lower LTV than your current HDB loan.
Understanding Refinancing Costs
One of the most overlooked aspects of refinancing is the total cost involved. While the lower interest rate is attractive, you need to account for various fees and charges that will reduce your net savings.
Breakdown of Typical Refinancing Costs
These costs are one-time expenses incurred during the refinancing process. Some banks offer promotional packages that waive certain fees (particularly processing fees), so it's worth comparing offers from multiple lenders.
Early Repayment Penalties on Your HDB Loan
One of the great advantages of HDB loans is that there are no early repayment penalties. When you refinance, you'll pay off your HDB loan in full, but there are no additional charges for doing so. This is different from bank loans, where early repayment during the lock-in period typically incurs penalties.
CPF Refund Considerations
If you've been paying your HDB loan using CPF, you should be aware that when you refinance to a bank loan, your CPF payments stop. Any CPF balance you've accumulated remains in your CPF account and can be used for other purposes (retirement, healthcare, etc.).
However, if you've been making additional voluntary CPF contributions to your Ordinary Account, those contributions will also cease once you switch to a bank loan. This is an important consideration for your overall financial planning.
Step-by-Step Refinancing Process
Now that you understand the financial implications and eligibility requirements, let's walk through the actual refinancing process. At Homejourney, we've helped thousands of homeowners navigate this process smoothly.
Step 1: Assess Your Current Loan and Financial Situation
Before approaching any bank, gather information about your current HDB loan:
- Current outstanding balance
- Current interest rate (should be 2.6%)
- Remaining loan tenure
- Monthly payment amount
- Original loan amount and disbursement date
You can find this information in your HDB loan statement or by logging into your HDB portal.
Also assess your personal financial situation:
- Current gross monthly income
- Other monthly debt obligations (car loan, credit cards, personal loans)
- Current CPF balance (for reference)
- Credit score (you can check this through Credit Bureau Singapore)
Step 2: Compare Bank Loan Offers
Rather than approaching banks individually, use Homejourney's Bank Rates to compare current rates from all major Singapore banks in one place. This saves time and ensures you're comparing apples-to-apples across different lenders.
When comparing offers, look beyond just the interest rate:
- Lock-in period: 1, 2, or 3 years? Longer periods provide more certainty but less flexibility
- Rate type: Fixed or floating? What's the spread above SORA?
- Early repayment penalties: What are the charges if you want to exit early?
- Fee waivers: Does the bank waive processing, valuation, or legal fees?
- Flexibility after lock-in: Can you refinance easily? What's the repricing option?
At Homejourney, we recommend getting quotes from at least 3–4 banks to ensure you're getting the best deal. Our platform allows you to submit one application and receive offers from multiple lenders simultaneously, saving you time and effort.
Step 3: Calculate Your Break-Even Point
Using the monthly savings from the lower interest rate and the total refinancing costs, calculate how long it will take to recoup your investment. Use our to run these calculations instantly.
As a general rule:
- Break-even within 24 months: Strong case for refinancing
- Break-even within 24–36 months: Reasonable case, especially if you plan to stay in the property long-term
- Break-even beyond 36 months: Refinancing is marginal; only proceed if you're confident you'll stay long enough to recoup costs
Step 4: Prepare Your Documentation
Banks will require standard documentation for your refinancing application. Prepare these documents in advance to expedite the process:
- NRIC (front and back)
- Latest 3 months of payslips
- Latest 2 years of income tax returns or Notice of Assessment (NOA)
- Latest CPF statement (showing balance and contribution history)
- HDB loan statement (showing current balance and payment history)
- Bank statements (3–6 months) showing regular income deposits
- List of all existing debts and liabilities
- Property details (address, block/lot number, lease remaining)
For self-employed individuals or those with variable income, additional documentation may be required.
Step 5: Submit Your Application
You have two options:
Option A: Apply through Homejourney Our platform allows you to submit one comprehensive application that's shared with multiple banks simultaneously. Banks will then compete for your business by offering their best rates and terms. You can use Singpass/MyInfo to auto-fill your application in seconds, significantly reducing processing time.
Option B: Apply directly with individual banks Visit the bank's website or branch and complete their application form. This takes longer but gives you direct contact with the bank's loan officer.
Homejourney's approach is more efficient and gives you leverage—banks know they're competing with other lenders for your business, so they're motivated to offer competitive terms.
Step 6: Review Loan Offers and Select Your Lender
Once banks receive your application, they'll typically respond within 2–5 business days with preliminary offers. Review each offer carefully, considering:
- Interest rate and lock-in period
- Total fees and charges
- Early repayment penalties
- Repricing options after lock-in period
- Customer service reputation
Don't automatically choose the lowest rate. Sometimes a slightly higher rate with lower fees and better flexibility is a better overall deal.
Step 7: Formal Approval and Documentation
Once you've selected your preferred lender, the bank will conduct a formal property valuation and complete their underwriting process. This typically takes 5–10 business days.
During this time, the bank will:
- Conduct property valuation
- Verify your employment and income
- Pull your credit report
- Calculate your TDSR to ensure compliance
- Prepare formal loan documentation
You'll receive a formal Loan Offer Letter outlining all terms and conditions. Review this carefully and raise any questions before signing.
Step 8: Legal Documentation and Mortgage Registration
Your solicitor (or the bank's panel solicitor) will prepare the necessary legal documents:
- Discharge of HDB mortgage: Formal release of HDB's mortgage on your property
- New mortgage deed: Registration of the bank's mortgage on your property
- Loan agreement: Terms and conditions of your new bank loan
You'll need to sign these documents and have them notarized. Most banks arrange for this to happen at their office or through their panel solicitor.
Step 9: Loan Disbursement and HDB Loan Repayment
Once all documentation is signed and registered with the Land Registry, the bank will disburse the loan amount. The funds are typically transferred directly to settle your HDB loan in full.
The timeline from application to disbursement is typically 3–4 weeks, though this can vary depending on the bank and completeness of your documentation.
Step 10: Set Up Your New Loan Payments
Once the bank loan is active, you'll set up automatic payments from your bank account. Unlike HDB loans (which could be paid via CPF), bank loan payments are typically made via GIRO (automatic bank transfer).
Update your budget to reflect the new monthly payment amount. If you're saving money with the lower interest rate, consider allocating those savings to additional loan repayments, investments, or emergency savings.
Risk Considerations and Market Factors
While switching to a bank loan can offer significant savings, it's important to understand the risks and market factors that could affect your decision.
Interest Rate Risk: What Happens After the Fixed Period?
Most bank loan packages include a fixed-rate period of 1–3 years. After this period, your loan typically reverts to a floating rate pegged to SORA (Singapore Overnight Rate Average). This introduces interest rate risk.
Scenario: You refinance to a 2.0% fixed rate for 3 years. After 3 years, your rate reverts to SORA + 1.6% (for example). If SORA has risen to 1.5%, your new rate would be 3.1%—higher than your original HDB rate of 2.6%.
This risk is real, but it's manageable:
- Lock in savings while you can: Even if rates rise after the fixed period, you've still benefited from 3 years of lower payments
- Plan to refinance: After the fixed period ends, you can refinance again if rates have dropped or if your financial situation has improved
- Choose fixed-rate packages: If rate risk concerns you, prioritize fixed-rate packages over floating rates
- Consider your time horizon: If you plan to sell or upgrade within 5 years, rate risk is less relevant
