HDB Loan vs Bank Loan

Singapore homeowners have a straightforward choice when taking out a home loan: an HDB loan, fixed at 2.6%, or a bank loan, which moves with market rates. Understanding the difference and when to switch can save you tens of thousands of dollars over the life of your loan.

What Is an HDB Loan?

The HDB loan is offered directly by the Housing Development Board at a fixed rate of 2.6% per annum, pegged to the CPF Ordinary Account rate plus 0.1%. This rate has not changed since 1999. It requires a minimum 25% downpayment (payable fully in CPF or cash), accepts CPF in full, and has no lock-in period, making it the default choice for most first-time buyers.

What Is a Bank Loan?

Bank loans are offered by private lenders and priced off market benchmarks, typically 3-month compounded SORA plus a spread. They come in fixed, floating, or hybrid structures and are generally more competitive on rate.

How Do the Rates Compare?

The HDB rate has been fixed at 2.6% for over two decades. Bank loan rates move with the market and over the last 20 years, they have been cheaper than the HDB rate 182 out of 240 months. As of mid-March 2026, the lowest fixed mortgage rate starts from 1.35%, with most packages in the 1.4% to 1.8% range depending on bank and loan size, a gap of more than 1 percentage point against HDB's 2.6%.

When Should You Switch?

HDB loans are a smart starting point, particularly for BTO buyers during the construction period. But once you collect your keys, refinancing to a bank loan is worth serious consideration. The earlier in your loan tenure you switch, the greater the savings, as monthly repayments in the early years are weighted more heavily towards interest than principal.

What Does Switching Involve?

Refinancing typically involves legal fees and a valuation, costing around $2,000 to $3,000 in total, though many bank packages offer legal and valuation subsidies for refinancing, which can significantly reduce or eliminate these costs. The process usually takes four to six weeks.