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HDB Loan or Bank Loan? Choosing The Right Mortgage Plan

Which would you choose?


With Singapore being one of the most expensive places to live in, it makes sense for us to consider our finances before purchasing a home in the country. For most people, buying a house in Singapore involves taking out a mortgage.

A home mortgage may be one of the biggest loans we will ever take in our life so that means proper research should be done so that we don’t end up spending more than we need to on our mortgage repayments. Mortgage rates in Singapore will vary widely, depending on the cost and size of the property as well as your age and employment, much like anywhere else in the world.

With the cost of a home in Singapore being so high, take measures to ensure that you make an informed decision. Property Guru Singapore’s useful affordability calculator will make it easy for potential buyers to see just how much they can afford when selecting a property in Singapore, based on their income and the current mortgage rates.

When looking to purchase property in Singapore, you can choose to take either a Housing and Development Board (HDB) loan or a bank loan. Either choice has their own pros and cons, which should be considered carefully.

Why Choose A HDB Loan

According to the Singapore Expats organization, over 80 per cent of Singaporeans live in estates of flats or apartments that have been developed by the HBD. These estates are towns that are self-contained and include medical facilities, education facilities, shopping centres and other recreational grounds for their residents to enjoy.

Flats sold by the HDB are subsidised. The overall aim of these flats is to provide Singaporean citizens with high-quality homes, vibrant towns and a real community-based area so that they can thrive within the area in which they live.

HDB loans are not available to all buyers as there are criteria for eligibility. For instance, at least one buyer must be a Singapore citizen with a total household income below $10,000.

If you are eligible, you can apply for a HDB loan after receiving a HDB Home Loan Eligibility (HLE) Letter. This letter will provide you with useful information that will show the maximum mortgage amount that you may borrow, the expected payment period and the monthly instalment amounts. These letters can be applied for on HDB’s website. You will need your pay slip and CPF contribution histories.

A HLE letter is valid for a total of 6 months. That means you need to purchase your HDB flat within the period of 6 months. Otherwise, you will need to reapply for it again.

An HDB loan is available to eligible buyers at a concessionary interest rate of 2.6% per year. This rate is 0.1% higher than the interest rate given by the CPF Ordinary Account. HDB loans do have some benefits. For the most part, HDB loans give you more leeway when it comes to missing payments and reducing payments. They are also more manageable in your overall cash flow.

Why Choose A Bank Loan?

After reading about the benefits of the HDB loan, it may be difficult to consider why anyone would take a bank loan – but many still do. For those who do not qualify to receive an HDB loan, a loan from the bank is the only option.

A housing loan from a bank has one simple benefit over an HDB loan, and that is that they offer a wide range of repayment options at a Singapore Interbank Official Rate. For the time being, this is lower than the HDB rate, ensuring a cheaper mortgage rate overall.

For those who are interested in property, and wanting to secure a mortgage in Singapore with the best rates, a bank loan is often the cheapest way of doing so.

Top Photo From Benjamin Lim

Planning Your Home Renovation?

For most homeowners, the renovation of their property is not something that have experience with. You may be unsure of how to get started, which interior designer to choose and how much you’ll need.

To facilitate a pleasant renovation experience for homeowners, Qanvast has brought together a curated list of more than 200 reliable interior designers on their platform. You can check out the past works of these interior designers and read reviews about them from other clients that have worked with them in the past.

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