facebookDoes HDB loan always mean less downpayment compared to bank loan? Since we are forced to wipe out our entire OA savings upfront to reduce the mortgage loan (with the option to keep 20k).? - Seedly

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Anonymous

08 Jun 2021

βˆ™

Property

Does HDB loan always mean less downpayment compared to bank loan? Since we are forced to wipe out our entire OA savings upfront to reduce the mortgage loan (with the option to keep 20k).?

Example
Unit price: 500k
Combined OA savings: 250k
Downpayment for HDB loan: 50k
Mandatory lumpsum CPF: 160k (opt to keep 20k each in OA)
Total OA used for HDB loan: 210k
Total OA used for Bank loan: 100k (20%)
If we take a bank loan, we are paying lesser downpayment (-110k). Having this amount in OA would generate a positive 2.5% interest. Far better than using it to reduce the principal loan amount. Since the bank loan interest rate most likely will not exceed 2.5%. Am I right to say that?

Discussion (4)

What are your thoughts?

Peter Lin

Peter Lin

29 Sep 2020

Brand Comms Lead at Mortgage Master

It's interesting that you would consider wiping out OA savings as a "downpayment"! I've never thought of it that way.

For those of us blessed with substantial OA savings, I personally feel it definitely doesn't make sense to take a HDB loan and wipe a substantial amount of it out.

One of the reasons why people choose HDB loans is because they don't have enough cash on hand for the bank loan downpayment, of which 5% must be in cash.

But ultimately, one shouldn't reduce the decision between choosing a HDB loan and a bank loan to how much of your OA it wipes out. There are many more considerations than that. (Seedly's guide is always helpful: https://blog.seedly.sg/the-complete-guide-bank-...)

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Maisul

Maisul

25 Sep 2020

Youtuber at Google (Channel : Say Do Invest)

I think the main difference is, HDB has a fixed interest at 2.6% no matter the condition of the economy.

Bank interest rate may be lower than HDB loan now, but it fluctuates depending on the economy i guess? I dont know how the ecnomics work but thats what I understand.

So I would rather have a stable interest rate throhgout my loan years than having a unstable interest rate that the banks are offering.

Banks of course you can re finance and change to other banks but the rates are usuallly about there lah so to save the hassle i stick to HDB loan.

Just my opinion, Im no property agent or financial advisor hehe :)

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