Other useful calculators

Emergency

Insurance

Investment

Retirement

Figuring out what kind of mortgage to get

For Singaporeans, the typical choice is between a bank loan and HDB loan. Here are some things you should consider before making this huge decision.

Loan eligibility

To be eligible for a HDB Loan, you will have to first satisfy the following conditions:

• At least one buyer for the HDB is a Singapore citizen

• Have not taken two or more housing loans from HDB previously

• Average gross monthly household income is less than S$14,000

• Average gross monthly household income is less than S$7,000 for singles buying 5-room or smaller resale flat or 2-room new flat in a non-mature estate

• Must not own or have disposed of any private residential property in the past 30 months before the date of application for an HDB Loan Eligibility letter

• * For HLE applications and flat applications received before 11 September 2019, the income ceilings are S$12,000 for families, S$18,000 for extended families, and S$6,000 for singles.

If you do not meet the above conditions, you can still opt for a bank loan. The eligibility for a bank loan is relatively simple. Usually, having a good credit score is good enough to get you a loan!

HDB Loans vs Bank Loans

Generally, the HDB Loan is a more popular financing option, especially for young couples and working adults. These are some of the reasons why some may choose a HDB Loan over a Bank Loan.

1. No early repayment penalty for HDB loan 

One of the key attractiveness of getting a HDB Loan is in its flexible repayment period. If you take on a HDB loan, you will not be penalised if you choose to repay your loan early.

In retrospect, a bank loan does not allow you to pay off your loan early, and you may even incur an early repayment penalty by doing so.

2. Those taking an HDB loan can choose to switch to a bank loan but not vice versa

For those who choose to take up a HDB Loan, you can choose to refinance and take up a bank loan instead. Since there is no lock-in period for HDB Loans, HDB Loan borrowers can freely choose to switch to a bank loan at any time, without incurring a penalty.

However, if you opt for a bank loan, you will not be able to change to a HDB Loan during the mortgage period. This means that taking a HDB Loan will give you more flexibility when it comes to early repayments, and the option to switch to a bank loan.

3. HDB loan has a lower initial downpayment 

The HDB loan has a lower initial downpayment. With a downpayment of 10% of the flat’s value, this is much lower than the 25% downpayment required by banks. This means that for a $400,000 flat, you will need to pay $40,000 in downpayment via your CPF, via the HDB loan.

If you’re taking a bank loan instead, you may have to fork up $100,000 in downpayment, of which $20,000 has to be paid in cash. Especially for couples who’ve just started out in their careers, the latter may seem relatively unaffordable.

4. Bank loans tend to have lower interest rates

At an interest rate of 2.6%, HDB loans mean you will potentially be paying more for your flat than intended. Bank loans can go as low as 1.5%. But note that most bank loans are pegged to a floating interest rate, so you may not be paying a constant interest rate throughout your loan tenure.