HDB Loan or Bank Loan – How to choose one?

Hdb loan or bank loan, what is better? This has been debated very often when a young couple decides to buy their HDB apartment. Which loan is the best? Should I take the HDB loan versus the bank loan? Let’s take a look at the pros and cons of each of these loans. Let us also simulate the rates of bank mortgages based on the Sibor movement.

What is an HDB loan?

For an HDB apartment, you have the choice between a bank loan or an HDB loan.


The Housing Development Board (HDB) offers a concessional home loan and interest rate to qualifying family members. HDB apartment purchases can submit an HLE (HDB Loan Eligibility) letter online.

In summary, an HDB loan is a Housing loan offered by the HDB, while a bank loan is a loan for the HDB apartment offered by the Bank.


What does HDB Loan take into account for credit assessment

“HDB does not take into account or does not take into account the following income for the credit assessment: –

  • Alimony / maintenance costs

  • Bonus

  • Claims / reimbursement / expenses

  • Director’s fees

  • Dividend / interest income from deposit accounts

  • Income from occasional overtime

  • National service allowance

  • Occupant’s income

  • Cost of living abroad allowance *

  • Pension*

  • Rental income

  • Foreign scholarship allowance ”(Source HDB)

So do not mistakenly think that the HDB loan is easier to obtain.

If your income is still insufficient, you may not find much help in opting for an HDB loan. If your credit is not too bad, that you have been rejected by bank loan, you can try to appeal to HDB for an HDB loan.

The HDB loan is more lenient when you fail to repay

If you are unable to repay your HDB loan, based on anecdotal reviews, HDB will not repossess your home immediately. However, it’s best to avoid taking this route if you can afford to pay off your mortgage.

HDB loan has a higher loan value than bank loan

If your income is justified, you can usually claim up to 90% of the property appraisal. But you also need to make sure that you don’t buy an HDB apartment with too few years left on the lease.

The age limit is 65 years while the maximum period of employment is 25 years. The remaining lease must cover the age of the youngest buyer up to 95 years old.

Scenario of person A = 45 years old and person B = 40 years old.

The HDB apartment has a remaining lease of 50 years. This means that at the age of 90 (partner’s age 40 + 50 years of remaining lease), assuming the youngest is still alive, he will be homeless. Thus, for the loan to be accepted, the residual term of the lease must then be 55 years or more.

For families who may not have enough 25% down payment, taking out an HDB loan that allows you up to a 90% loan-to-value ratio and therefore a 10% lower down payment can get you to buy. quickly an HDB apartment.

What are the income criteria for HDB loan?

Your payment should not exceed 30% of your monthly income currently based on 2.6%. On a bank loan basis, the 30% MSR is based on a 3.5% stress test interest rate.

If you collectively earn $ 4,500 per month, that means your monthly mortgage servicing should not exceed $ 1,500 per month.

For families, the maximum household income must be less than $ 14,000 (per month) or less than $ 21,000 (per month) including extended families and $ 7,000 for a single person applying for an HDB loan.

* For HLE applications and housing applications received before September 11, 2019, the income limits are $ 12,000 for families, $ 18,000 for extended families and $ 6,000 for singles.

HDB loan or bank loan – Comparison of the main differences

HDB loan vs Bank loan at a glance

Table 1: Table of HDB vs. Bank Loans at a Glance, iCompareLoan.com

What are the prime interest rates for HDB Loan home loans?

The HDB loan is set at 0.1% above the CPF OA rates of 2.5%.

HDB Loan or Bank Loan – Which one is cheaper?

Bank loans have been cheaper than HDB loans for many years.

HDB loan or bank loan

HDB loan or bank loan

Sibor 20-year record from 2000 to 2020

Graph 1: Sibor Price from 2000 to 2020, iCompareLoan.com

Assuming that the bank loans were valued at Sibor (3 months) + 0.8%, this means that when Sibor (3 months) is above 1.8%, it will equal an interest rate on the bank loans more than 2.6%.

Based on a 0.8% spread, ie Sibor (3 months) + 0.8%, this would be 2.6%. There are about 4 years out of a 20-year period when the bank interest rate is less than 2.6%, HDB’s reported concessional lending rate is 2.6%.

The average Sibor at 3 months over 20 years is about 1.09%

The median Sibor at 3 months over 20 years is 0.887%.

The probable rates of bank loans during this 20-year period are as follows: –

HDB loan 25-year amortization schedule for a 500k loan

HDB loan 25-year amortization schedule for a 500k loan

Table 1: HDB concessional loan 2.6% amortization schedule, loan of 500,000 over 25 years with husband and wife both earning $ 4,200 at age 35, iComparerPrêt.com

A total of $ 171,900 in interest is paid over 20 years, and that doesn’t even take into account the time value of the money and the outstanding loan balance of $ 127,496 remains at the end of year 20.

HDB bank loan - based on median of Sibor's 20-year history

HDB bank loan – based on median of Sibor’s 20-year history

Table 2: Sibor’s 20-year median history (3 months) + 0.8% = 1.687% Amortization schedule, 500k loan over 25 years with husband and wife both earning $ 4,200 at age 35 , iComparerPrêt.com

A total of $ 108,064 of interest is paid over 20 years with an outstanding loan balance of $ 117,526.

HDB Bank Loan - Based on Sibor Average's 20-year history

HDB Bank Loan – Based on Sibor Average’s 20-year history

Table 3: Sibor’s 20-year average (3 months) + 0.8% = 1.89% Amortization table, loan of 500,000 over 25 years of service with husband and wife both earning $ 4,200 at age 35 , iComparePrêt.com

HDB Loan or Bank Loan – What is the interest payable over 20 years

HDB loan vs bank loan interest rate

HDB loan vs bank loan interest rate

Table 4: HDB loan or Bank loan? Comparisons of the Hdb loan compared to the bank loan of the Total Interest Paid over 20 years, iComparePrêt.com

The difference in interest cost paid using an HDB concessional loan versus a bank loan could be approximately $ 63,835 ($ 171,899 – $ 108,064) or $ 49,960 ($ 171,899 – $ 121,939) and about $ 10,000 less in outstanding loans.

Or to put it another way, between paying $ 108,064 (based on a 20-year median) or $ 121,939 (based on Sibor’s 20-year average) versus $ 171,899. The HDB concessional loan rate is at least ~ 41% higher compared to a bank rate based on the 20-year sibor average.


No, once you have chosen a bank loan, you cannot go back to take out an HDB loan.

Where are Singapore interest rates heading?

Based on the current Covid-19 pandemic and the economic damage it has caused around the world, the US Federal Reserve has printed a lot of money, causing interest rates to stay low for several years in the United States. This impression of money has flooded the world with cheaper money and therefore a lower Sibor rate, and therefore lower interest rates. This was demonstrated by the fall in interest rates between 2008 (US financial crisis) and 2014, where interest rates remained low for 5 to 7 years.

For those looking to buy a property, the lower interest rates also mean that real estate investors would likely see positive returns, as returns minus interest charges would still be positive.

Now might be the time to consider refinance your mortgage.

Here is a buyer report for HDB Flat, you can take a look.


Still not sure whether to take out an HDB loan or a bank loan? Follow your heart.

In general, it is not easy to get an HDB bank loan as you can only spend up to 30% of your gross income on the down payment of the property. This is also known as MSR

Read our other articles on HDB Loan or Bank Loan here: –

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