Bank Loan vs HDB Loan | Loans Hacks

Should I take a Bank loan or HDB loan when Buying a flat?

In this video, we are covering two questions today. The first question is, “Bank loan vs HDB loan… Which is better?” The second question is, “What is the difference between repricing and refinancing?”

📌 Bank loan vs HDB loan: Financing options when buying an HDB flat

When choosing financing to buy an HDB flat, buyers will basically have two choices. One of them will be taking a loan directly from HDB, or what we call the HDB loan. The second option will be taking a bank loan, which is taking a loan from a financial institution. The rules are different for these two loans. So I’ll start off by explaining the HDB loan first.

The interest for HDB loans is 2.6% per annum. It is much higher than the current bank rates, which is between 1.2% to 1.4%. Now that you are aware of the difference between both interest rates, we will go straight to the reasons why people know that the HDB interest rates are higher, but they are still going for it.

Bank Loan vs HDB Loan

📌 Bank loan vs HDB loan: Loan to Value Ratio

The first reason is the loan to value ratio. For HDB loans, it is up to 90%. Whereas for a bank loan, it is up to 75%. This means that the highest loan amount you can get for HDB flat is 90%.

This is very helpful for people who are cash tight. Although HDB can loan up to 90%, there is one catch. You must wipe out your CPF Ordinary Account (OA) first, then they will lend you the balance.

Loan to Value Ratio

📌 Bank loan vs HDB loan: Cash Proceeds from an earlier purchase

As a Singaporean, you can take up to two HDB loans. If you wish to take a second HDB loan, you will need to set aside half of the cash proceeds from the first house you sold.

For buyers who want to keep the cash proceeds from the first house they have sold, then an HDB loan would not be such a viable option for you. You might want to go for a bank loan for the second purchase.

To make full use of your HDB loans, most buyers will tend to buy a bigger HDB for their first loan, while the second purchase will be smaller. So go for a bigger HDB flat if possible for your first loan.

second hdb loan

📌 Bank loan vs HDB loan: Downpayment

The third consideration is the downpayment required. As we have discussed earlier, when choosing to take an HDB loan if the criteria are right, you do not come up with any cash down payment except for the initial cash deposit. When you are able to loan up to 90%, that means you can use CPF for the remaining 10%.

Meaning to say if the house has no Cash Over Valuation (COV), you don’t pay any cash for this purchase.

But if you choose to go with a bank loan, you have to keep in mind that the ratio is up to 75%. 20% is covered by CPF, but this 5% is compulsory to be paid in cash. So for people who can afford the cash, they will go for a bank loan.

So for buyers who are CPF rich but they’re tight on cash, they will go for an HDB loan. Although the rates are higher, they don’t have that much cash. So this is something you have to consider, do your due diligence and work out your finances. If you feel like that 5% cash is a bit too much of a stretch and if you qualify for the HDB loan, then go for it.

📌 Bank loan vs HDB loan: Loan Contract Terms

Contract terms are more favourable towards HDB loans because there is no lock-in period. There is also no penalty for early repayment. In a way, HDB is still a Government body, unlike the commercial banks where they are profit-driven. So if you sign up with a bank for a lock-in period of two to three years and you pay early, they will have a penalty between 1% – 1.5%.

Some people classify this as a clawback. For certain bankers, they will use that term.

📌 Swapping between Bank Loan vs HDB Loan

An important tip is that you can choose to switch to a bank loan when you are on an existing HDB loan. I am on an HDB loan package and I am considering going to a private loan package at the moment.

So this is a money-saving tip. Assuming you are qualified, go for an HDB loan first and later convert to a private bank. But do keep in mind that if you are on a private bank loan, you cannot convert it to an HDB loan package. So it only works from HDB to private, but not the other way around.

If you are still uncertain or unsure which loan packages to go for or how to go about your financing or calculation, feel free to call us at any time. We will be able to give you the right advice.

📌 Differences between Repricing vs Refinancing

This brings us to repricing vs refinancing because I think this question is also linked to this home loan issue. In layman terms, repricing or refinancing both serve a common objective: to find cheaper bank rates.


For repricing, it means sticking to the same bank. This means you do not change the bank. Or you ask the bank for a lower package or a more attractive package that is likely to be lower than now. Repricing is much simpler because you are staying with the same bank. There will be no reassessment fees, such as performing another home valuation or reassessing your income.

In my opinion, if the current bank rate is good, stick to the same bank so there will be fewer legal and admin fees.


Refinancing is to change bank. Let’s say you are with Bank A, and you found Bank B that offers a much lower interest rate. So this is called refinancing when you decide to switch over to Bank B. Both serve the purpose of bringing down your interest rate payments but refinancing means that the bank is new. You will need to do your income assessment and more paperwork. An estimation of the legal and valuation fees will likely be more than $2,000.

📌 Save potentially hundreds or thousands of dollars with this tip

A tip for the reader: you should reprice or refinance only when the savings is more than the cost. You need to have savings after you have done your calculation. Here is a guide, if your loan is about two to three years back, there is a good chance you can reprice or refinance because interest rates are much lower now.

Bank Loan vs HDB Loan
Young Asian couple reviewing bills, planning family budget and calculating finances at kitchen table with bills, calculator and planner

So do make this effort to call your bank and ask them what is their current best rate. If there’s a difference, ask them what is the lock-in period for your package and what are the penalties if I do a repricing or refinancing.

This phone call will save you potentially hundreds or thousands of dollars.

What a lot of people don’t realise is that they just let their loans run as per normal. They are so used to seeing that. But sometimes they may not realise that there is money to be saved here. If you just make a simple phone call and do a reassessment, you can save $150 to $200 every month.

So always check and be updated on the latest interest rates. So if any questions just give us a call or drop us a message in the contact form below. We can explain this privately to you in detail.

📌 HDB Top 10 Questions

  • Where are the Million dollar HDB?
  • Which are Hottest HDB towns in 2021?
  • Is Cash Over Valuation (COV) making comeback?
  • How to Unlock the Value of Our HDB?
  • Upgraders Dilemma: Sell First or Buy First?
  • Should I buy an older Resale HDB?
  • BTO or Resale or EC: 3 Test Qns
  • HDB or Bank Loans? What is Repricing?
  • 3 Important Questions to Ask Before Buying
  • 5 Commonly Asked HDB Rules or Terms

Check out all HDB Top 10 Questions here

Like this Article or Video?

Check out more insights for First-Time Buyer

Posted in

Looking to buy

Should I buy a BTO or a condominium for my first property? The answer varies from buyer to buyer. Factors to consider include your income and your priorities. Schedule an interest-free consultation with the experts from Property Den!

Dennis Lim

Dennis has more than a decade of experience investing in real estate. Like many fellow Singaporeans, he grew up in a HDB flat with dreams to live in a condominium. Through careful financial planning & hardwork, this became a reality when he was 30. He now owns 3 private properties in Singapore and has helped hundreds of Singaporeans to achieve their goal of upgrading their homes in land-scarce Singapore.

Insight Topics

Connect With Us


first condo

Couples Buying First Condo: 4 Commonly Overlooked Factors

27 October 2022

A must-read for first time couple buyers or HDB upgraders who have decided to buy their first condo. Review these 4 commonly overlooked factors before buying

Read More
income & loan requirement

Everything about Income and Loan Requirements for Your 1st Condo

29 September 2022

Many buyers face many questions regarding income and loan requirements when buying their first condo. This article will help you understand them in simple terms

Read More
buy private condo

Should You Buy Private Condo as Your First Home?

28 September 2022

Majority of Singaporeans will buy a BTO or resale HDB as their first home. Should you buy private condo as first home? Below are 3 factors for consideration.

Read More
first private property

Buying Your First Private Property before 35

31 August 2022

Buying a condo is more complex than buying a HDB. Below are 3 useful points for those who are buying their first private property before turning Age 35

Read More
Single Permanent Resident buying First Property

Single Permanent Resident Buying First Property (Top 3 Questions by PR)

25 August 2022

Buying a property as a single Singaporean is tough in Singapore, let alone single Permanent Resident buying first property. Checkout all 3 FAQ by PR

Read More



"Dennis came with strong recommendations from a dear friend. He helped me with the purchase of my first property. He was very patient and never once tried to hard sell me to buy a property. Dennis is a trustworthy and knowledgeable professional who I highly recommend with confidence to everyone I know!"




"Dennis was very helpful and has guided us throughout on the process. He managed to get good number of clients for viewing of our unit. He is very responsive and always readily available when needed. He has excellent negotiation skills as well when required for the deal"