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

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?

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    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/buying-a-flat/new/finance/costs-and-fees

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      HDB loan better.

      In the worst case scenario, when one can’t finance the mortgage (retrenchment, hospitalised due to accidents, etc), HDB is unlikely to evict you to force sell the property. Banks however, are will do so.

      Yes and no, for the part on the paying off as much loan as possible. This depends on what kinds of returns you can consistently make with the ”spare cash”. If you can consistently make more than the loan interest rates, you should not pay off the loan that quickly. If you cannot, perhaps it is better off reducing the % of loan. Also, if you used your CPF for either loans, remember you have to factor for accrued interests.

      Most importantly, it depends on whether you will have a peace of mind with either options.

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        HDB loans for me as I just started my career. Downpayment is lower
        ...

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