When purchasing an HDB flat in Singapore, one of the key financial decisions buyers must make is whether to finance their home with an HDB concessionary loan or a bank loan. Both options come with distinct advantages and trade-offs, and the best choice depends on your financial situation, risk appetite, and long-term plans. Here's a breakdown to help you decide.

1. Eligibility

HDB Loan

• Only Singapore Citizens are eligible (or at least one buyer must be a citizen in a joint application).

• Monthly household income must not exceed $14,000 ($21,000 for extended families).

• Must not own any private residential property in the last 30 months before the loan application.

• Must not have taken two or more previous HDB loans.

Bank Loan

• Open to all buyers, including Permanent Residents and those buying Executive Condominiums (ECs).

• No income ceiling or property ownership restriction.

2. Downpayment

HDB Loan

• Requires only 5% downpayment, which can be paid fully using CPF Ordinary Account (OA).

• No cash required upfront unless CPF is insufficient.

Bank Loan

• Requires at least 25% downpayment, where 5% must be paid in cash and 20% can be from CPF OA.

• Higher upfront cost and stricter CPF usage rules.

3. Interest Rates

HDB Loan

• Fixed rate at 2.6% per annum, pegged at 0.1% above the CPF OA interest rate.

• Stable and predictable, unaffected by market fluctuations.

Bank Loan

• Typically lower at first (as low as 1.6%–3.5%), but can fluctuate with market rates (SORA or fixed rate packages for 1–5 years).

• May increase over time, introducing long-term uncertainty.

• Fixed-rate deals often carried a premium—3% to 4.5% was common throughout much of Year 2022.

4. Loan Tenure & Amount

HDB Loan

• Maximum tenure: 25 years or until the borrower is 65 years old, whichever is shorter.

• Loan-to-Value (LTV) limit: up to 80% of the purchase price or valuation (whichever is lower).

Bank Loan

• Maximum tenure: 30 years for HDB flats.

• LTV limit: up to 75% (with stricter criteria for subsequent loans).

• Stricter Total Debt Servicing Ratio (TDSR) applies.

5. Flexibility and Repayment

HDB Loan

• More flexible repayment options.

• No penalty for early repayment. You can clear your housing loan and save the interest fees.

• Easier to defer or adjust repayments during financial hardship.

Bank Loan

• Less flexibility.

• Early repayment penalties (typically 1.5%) if within the lock-in period.

• Refinancing options available but may incur fees.

6. Switching Between Loans

• You can switch from HDB loan to a bank loan later, often to take advantage of lower interest rates.

• You cannot switch from a bank loan to an HDB loan.

Conclusion: Choose HDB Loan or Bank Loan?

Criteria	Choose HDB Loan If...	Choose Bank Loan If...
Stability	You prefer predictable fixed payments	You can manage fluctuating interest rates
Upfront Cost	You want to minimize initial cash outlay	You have enough cash for the downpayment
Flexibility	You may need repayment flexibility	You are confident in consistent income
Long-Term Plan	You plan to hold the flat long term	You plan to refinance or sell earlier

Final Tip: Consider starting with an HDB loan for security and later refinance with a bank loan when you're financially stable and ready to take on more risk for lower rates.