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  • Writer's pictureAaron Lin

Choosing The Right Mortgage Loan For Your HDB Flat

Updated: Mar 22, 2021



How do we choose the right mortgage loan for your HDB flat? How do we maintain an affordable interest rate over the tenure? These questions sound complicated, but not to worry! I’m here to simplify these questions so that you can choose the right mortgage loan, according to your specific circumstances.


HDB Loans


There are HDB loans, which are a provision for Singaporeans. There are no compulsory cash portions of the downpayment to be paid upfront. This can be paid in CPF, provided you have enough savings in your Ordinary account. The loan to value limit (LTV) is also quite high, reaching a maximum of 90%. Moreover, the legal fees are cheaper than private bank loans.

Nonetheless, there are drawbacks. You can however only take HDB loans twice. Moreover, when you take HDB loan, the CPF portion in your ordinary account will be fully wiped out. The HDB loan interest rate is also around 2.6%-2.8%, and in my years of experience, this has always been higher than bank loans interests.


Bank Loans


There are, of course, bank loans. Bank loans interest rates typically range between 1.65% to 2%. This has always been more attractive than HDB loans. When you take a bank loan, you also don’t necessarily have to wipe out the entirety of your CPF portion in your ordinary account. Nonetheless, if you take a bank loan, the maximum LTV is 80%, as compared to 90% of HDB loans. With banks, the downpayment is 25%, of which 5% has to be paid in cash.


HDB Loans Versus Bank Loans: My Advice?

Most people’s second loan will most likely be a bank loan. If you’re looking to retain some CPF, it’s better to go with a bank loan. It’s really your choice but what I normally advise is: if you’re looking to buy a big HDB flat, use the HDB loan to finance it. If you’re looking to buy a small HDB flat, and your next purchase will be bigger, then keep your HDB loan for the bigger house and apply for the bank loan.


Furthermore, while bank loans have lower interest rates, you do need to spend some time to maintain it. Some things to consider with regards to bank loans include whether there is any penalty to making a partial payment, whether there is an admin fee to reprising, and the ability to refinance and change banks if the interest rates are high.


Ultimately though, the decision on whether to take on a HDB loan or bank loan depends on your circumstances, which are unique to everyone! Feel free to reach out to me have a chat on your needs and which particular loan suits you.




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