An HDB concessionary loan remains a popular choice among flat buyers because its interest rate is pegged at 0.1 percentage point above the CPF Ordinary Account (OA) rate. The rate is reviewed quarterly and has remained at 2.6% p.a. for decades, offering borrowers a relatively stable and predictable financing option compared to market-based bank loans.
However, if you are planning to upgrade from one HDB flat to another, the key consideration is not just the interest rate. More importantly, it is how much you can borrow the second time, how much of your sale proceeds you must use, and whether using your HDB loan eligibility early could limit your flexibility later.
HDB Loan Limits Are Now More Aligned With Bank Loans
Today, the maximum HDB loan-to-value (LTV) limit is up to 75% of the flat price for new flats, or 75% of the lower of the resale price or valuation for resale flats, subject to age, lease and loan tenure conditions.
This is a significant shift from the past. The HDB loan LTV limit was reduced from 80% to 75% in August 2024 for resale applications, and for flats launched from the October 2024 sales exercise onwards. As a result, buyers should no longer assume that an HDB loan will automatically allow them to borrow substantially more than a bank loan.
If you are taking an HDB loan today, you will also need a valid HDB Flat Eligibility (HFE) letter before applying for a new flat. For resale flats, you must have a valid HFE letter before obtaining an Option to Purchase and when submitting your resale application.
Read Also: Here’s Why It Makes Sense To Take The Maximum HDB Home Loan You Can When Buying Your First Flat
The Key Restriction On A Second HDB Loan
The most important thing to understand is that a second HDB housing loan is not assessed in isolation.
When you sell your existing or last-owned flat, you are required to refund the CPF monies used (with accrued interest) into your CPF OA. For a second HDB loan, you must then use 1) refunded CPF monies, as well as 2) part of your cash proceeds, before HDB determines how much you can borrow.
Specifically, you may keep the higher of $25,000 or 50% of your cash proceeds. The remaining amount will generally be used towards the next flat purchase before the second HDB loan is granted.
This means the proceeds from your first flat can directly reduce the size of the second HDB loan you are eligible for.
For example:
- If your cash proceeds are $25,000 or less, you can typically keep the full amount
- If your cash proceeds are $40,000, you may keep $25,000, while $15,000 goes towards the next purchase
- If your cash proceeds are $100,000, you may keep $50,000, while the remaining $50,000 is used first before your loan is determined
While this may seem straightforward, it has real implications. If your first flat generates significant proceeds, you may be required to deploy a large portion of those funds into your next home, rather than keeping them for liquidity, renovation, or other financial goals.
Read Also: HDB Or Bank Loan: Pros & Cons To Consider Before Deciding On Which Housing Loan To Take
Why This Matters More Today
In the past, one of the biggest advantages of an HDB loan was its higher LTV limit compared to bank loans. That advantage has narrowed significantly.
Today, both HDB loans and bank loans for HDB flats can go up to 75% LTV (subject to conditions). Bank loans require at least 5% cash downpayment and are subject to Total Debt Servicing Ratio (TDSR) rules, while HDB loans do not require a minimum cash component if you have sufficient CPF savings. Both are subject to the 30% Mortgage Servicing Ratio (MSR).
This means the decision between an HDB loan and a bank loan is less about how much you can borrow upfront, and more about trade-offs.
An HDB loan offers a stable, government-pegged interest rate and no prepayment penalties. However, if you use it for your first flat, your second HDB loan may be reduced because you are required to use your CPF refunds and part of your cash proceeds first.
A bank loan, on the other hand, offers more flexibility in structuring your finances and does not impose the same requirement on how sale proceeds are used. But it comes with variable interest rates, a mandatory cash down payment, and TDSR constraints.
What Buyers Should Consider Before Using Their First HDB Loan
If your first flat is likely to be a stepping-stone rather than your long-term home, it may be worth thinking carefully before using your HDB concessionary loan right away.
First, your second property is often the one where you need financing more. As incomes grow and families expand, many buyers upgrade to larger or more expensive flats. However, by then, your second HDB loan may be reduced due to the requirement to use your CPF refunds and part of your sale proceeds upfront.
Second, the stability of an HDB loan may matter more for a home you intend to hold long term. If your first flat is temporary, you may not fully benefit from that stability.
Third, HDB loans come with stricter rules on the use of CPF OA savings. You and your co-applicant may retain up to $20,000 each in your CPF OA, but the remaining available balances must generally be used for the flat purchase before the loan is granted. This also applies to CPF monies refunded from your previous flat when taking a second HDB loan.
The Practical Takeaway
A second HDB concessionary loan can still be useful, particularly for households that value payment stability and prefer a predictable financing structure.
However, buyers should not focus solely on the concessionary interest rate.
With the HDB loan LTV limit now at 75%, the historical advantage of significantly higher borrowing is no longer as strong. More importantly, the requirement to use your CPF refunds and part of your cash proceeds before taking a second HDB loan can materially reduce your financial flexibility.
For many buyers, the better question is not simply, “Is the HDB loan cheaper today?” but rather, “When in my housing journey will the HDB loan be most valuable?”
If your first flat is a starter home, preserving the option to use an HDB loan later—when you may need it more—could be the more strategic move.
Planning your next HDB move?
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Beyond just comparing HDB and bank loans, Cashew lets you model your full property journey. You can see how CPF refunds, cash proceeds, and loan limits affect your next purchase, and get a clearer picture of your affordability before making a decision.
When you’re ready, Cashew also connects you to mortgage specialists who can help you secure a suitable loan—so you can move from planning to action with greater confidence.
Read Also: Taking A HDB Housing Loan: Should You Keep More Than $20,000 Or Let Your CPF OA Be Wiped Out
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