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

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?

Discussion (13)

What are your thoughts?

Teo See Hwa

Teo See Hwa

06 May 2020

MArketing Associate at Propnex

Without knowing your potential not much to share which is better for you.

  1. When you bought BTO.

  2. Monthly income and household income

  3. OA, SA, MA, and cash on hand.

  4. The number of dependents parent, the parent-in-law children.

  5. Highest qualification.​​​

Nicholas Ho

Nicholas Ho

06 May 2020

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!

Chris Chin

Chris Chin

07 Jun 2019

Senior Supply Chain at Mnc

Always go for HDB Loan, as you don't risk being evicted by HDB if you can't pay.

View 3 replies

Bank loan is cheaper but the loan quantum is lower than hdb's 90%

Amanda Ho

Amanda Ho

21 Sep 2018

Financial Planner at AXA

Hi there, would recommend you to take up HDB loan (2.6%) instead of wipping out your CPF OA account ...

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