Complete Guide To Taking A Concessionary HDB Housing Loan

When buying an HDB flat, you can typically choose between an HDB housing loan and a housing loan from a financial institution (FI), such as a bank.

While the HDB loan is commonly called a “concessionary” loan, it may not always offer the lowest interest rate. Its interest rate is pegged at 0.1 percentage point above the prevailing CPF Ordinary Account (OA) interest rate and reviewed quarterly. For decades, this has remained at 2.6% p.a.

Bank mortgage rates may sometimes fall below 2.6% as they do currently, but interest rates are only one consideration. Eligibility, downpayment requirements, repayment flexibility and the ability to refinance can also affect which loan is more suitable.

Are You Eligible For A Concessionary HDB Housing Loan?

For HDB Flat Eligibility (HFE) letter applications from 24 August 2026, the monthly household income ceiling for an HDB housing loan was raised from $14,000 to $16,000 for families and from $7,000 to $8,000 for eligible singles.

In general, applicants must meet the following conditions:

HDB housing loans are not available for 2-room Flexi flats on short leases or Community Care Apartments. Meeting the eligibility criteria also does not guarantee the maximum loan amount, as HDB considers factors including age, income, job stability, financial commitments, repayment records and monthly cash savings.

Applying For A Concessionary HDB Housing Loan

Homebuyers should apply for an HDB Flat Eligibility (HFE) letter before committing to a flat.

The HFE letter sets out your eligibility to buy an HDB flat, the CPF housing grants you may receive and, where applicable, the HDB housing loan amount you are eligible for. Processing can take up to a month after HDB receives all required documents, and may take longer during periods of high application volume. An HFE letter is valid for nine months from its date of issue.

You Can Borrow Up To 75% Of The Flat’s Value

The maximum Loan-to-Value (LTV) limit for an HDB housing loan is generally 75%. For a new flat, this is based on the purchase price; for a resale flat, it is based on the lower of the resale price or HDB’s valuation. The maximum LTV may be lower if the remaining lease does not cover the youngest applicant until at least age 95.

If you qualify for the full 75% LTV, you can pay the remaining 25% in cash and/or CPF OA savings. Your actual loan may still be lower, depending on HDB’s assessment of your financial circumstances.

Your Mortgage Servicing Ratio Is Capped At 30%

The Mortgage Servicing Ratio (MSR) generally caps monthly mortgage instalments for an HDB flat at 30% of the applicants’ monthly income. When calculating the eligible HDB housing loan amount, HDB uses an interest rate floor of 3.0% p.a., or the prevailing HDB housing loan interest rate, whichever is higher.

For example, a household earning $16,000 a month would generally have its monthly mortgage instalment capped at $4,800 under the MSR. This does not mean the household will automatically qualify for a loan requiring a $4,800 monthly repayment, as other loan limits and HDB’s credit assessment still apply.

You Can Retain Up To $20,000 In Your CPF OA

When taking an HDB housing loan, buyers may retain up to $20,000 in their CPF OA and use their remaining available OA savings towards the flat purchase. Keeping some CPF savings provides a buffer that can help cover future mortgage instalments if household income is temporarily disrupted.

Read Also: Taking A HDB Housing Loan: Should You Keep More Than $20,000 Or Let Your CPF OA Be Wiped Out

HDB Fire Insurance And Home Protection Scheme

Homeowners with an HDB housing loan must buy HDB fire insurance from HDB’s appointed insurer. It covers the cost of reinstating building structures, fixtures and fittings provided by HDB, but does not cover renovations, furniture or personal belongings.

If you use CPF savings to pay your monthly housing loan instalments, you will also generally need to be insured under the Home Protection Scheme (HPS). This mortgage-reducing insurance can pay the insured share of the outstanding housing loan if an insured member dies or becomes permanently incapacitated before the loan is fully repaid.

Why You May Want To Go With A Concessionary HDB Housing Loan

Even when bank mortgage rates are below 2.6%, an HDB housing loan has features that may appeal to homebuyers who value predictable interest rates, repayment flexibility and less need to manage their mortgage actively.

#1 Your Interest Rate Is Relatively Stable

The HDB concessionary interest rate is pegged at 0.1 percentage point above the CPF OA interest rate and reviewed quarterly. For decades, this has remained at 2.6% p.a.

Bank mortgage rates depend on the package and market conditions. Fixed-rate packages typically lock in the rate for a specified period, while floating-rate packages may move with benchmarks such as SORA. Homebuyers should therefore compare prevailing packages rather than assume either an HDB or bank loan will always be cheaper.

#2 Less Work To Manage Your Home Loan

Bank home loans may have lock-in periods, promotional rates and repricing or refinancing options that borrowers need to review periodically. Over a 20- or 25-year mortgage, homeowners who want to keep their borrowing costs competitive may have to change packages several times.

An HDB housing loan requires less active management because borrowers do not have to shop for a new mortgage package whenever a fixed-rate or promotional period ends.

#3 Greater Flexibility In Managing Your Home Loan Payments

HDB borrowers can make partial capital repayments or redeem their loan early without an early repayment penalty. Depending on their circumstances and the applicable maximum loan tenure, they may also apply to change their monthly instalment or repayment period.

This flexibility can be useful when household finances change. A homeowner could make an additional repayment after receiving a bonus, for example, while someone facing tighter cash flow may explore adjusting their repayment arrangement. Bank mortgages may impose early repayment charges during their lock-in periods, depending on the package.

#4 You Can Switch From An HDB Loan To A Bank Loan

Homeowners can refinance an HDB housing loan with a bank later if they find a suitable mortgage package. However, the switch only works one way: once an HDB housing loan has been refinanced to a bank loan, you cannot switch the mortgage back to an HDB housing loan.

This gives buyers who start with an HDB loan the option of moving to a bank later while retaining the HDB loan in the meantime. When choosing between the two, consider not just the current interest rate but also repayment flexibility, refinancing costs and how actively you want to manage your mortgage.

Compare Your Home Loan Options Before Deciding

An HDB housing loan may offer greater flexibility and a relatively stable interest rate, but it is still worth comparing your options before committing to a mortgage. Depending on prevailing rates and your financial situation, a bank home loan could offer a lower interest rate or a package that better suits your needs.

You can compare home loan options with Cashew to get a better sense of the mortgage packages and rates available. Alternatively, you can speak to a mortgage specialist at Redbrick to explore bank home loan options and find a package suited to your circumstances.

Read Also: What A 1% Increase In Interest Rates Could Mean For Your Home Loan Repayment