facebookWhich is the better loan option to take for HDB BTO? HDB or Bank Loan? What is the typical loan amount as a % of property price? If one has ability to pay up for the property, should one do so and reduce the % of property price that is using loans? - Seedly

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          Tan YB

          Tan YB

          Level 4

          29 Jun 2020

          Property

          Which is the better loan option to take for HDB BTO? HDB or Bank Loan? What is the typical loan amount as a % of property price? If one has ability to pay up for the property, should one do so and reduce the % of property price that is using loans?

          12

              Discussion (12)

              What are your thoughts?

              I'd suggest to always start with a HDB loan.

              1) If you start with a bank loan, you can never switch over to HDB loan. If you start with a HDB loan, you can refinance with a bank loan.

              2) The downpayment required if you take HDB loan is 10% (cpf and/or cash) whereas downpayment is more if taking a bank loan:

              • 20% of purchase price for loan ceiling of 80%

              • 5% in cash

              • Balance using CPF OA savings

              • 40% of purchase price for loan ceiling of 60%

              • 10% in cash

              • Balance using CPF OA savings

              • Remaining amount for loan ceiling of 50% or lower

              • 20% in cash

              • Note that you will also need to pay another 5% in cash during the key collection
              • Balance using CPF OA savings

              Source for #2: http://www.hdb.gov.sg/cs/infoweb/residential/bu...

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                  Nicholas Ho

                  Nicholas Ho

                  06 May 2020

                  Level 3·Financial Advisor at Manulife Financial Advisers Pte Ltd

                  Hi good questions,

                  In my opinion, it depends on your income, savings and comfortability.

                  HDB BTO loans are at 2.6%, current bank loan (due to Covid-19) is at floating/fixed 1.4/1.6%. On average of past few years, the bank interest is between 1.6-2% (which is still significantly lower)
                  Assuming a $500K property loan,

                  In 30 years, you are paying additional $220+k based on 2.6% (HDB Loan), while if bank loan of 1.6% it will be around $129+k. The difference is close to $90k over 30 years.

                  Personally I prefer the later Bank Loan, as HDB Loan interest rate are just too high in my opinion. The only troublesome part would be that for bank loan, likely you will need to refinance every few years to get the best interest rate or look for a mortgage advisor.

                  At the same time, whether you choose HDB or Bank Loan, you do not need to pay for your home loan in cash; you can pay for it through your CPF Ordinary Account (CPF OA). However by doing so, it also means that your CPF balance will not be generating it's interest, 2.5% for OA.

                  By using OA to cover for monthly housing loan you are incuring the interest of 2.6% (assuming HDB loan) + 2.5% (guaranteed from CPF-OA interest) = loss of 5.1% per year.

                  Do consider carefully whether you should take HDB housing loan, or bank loan.. and also if you should pay the monthly installment by cash or CPF-OA.

                  Best of luck!

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                      HDB loan better.

                      In the worst case scenario, when one can’t finance the mortgage (retrenchment, ho...

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