Asked 4w ago
Hi, I would like to ask anybody here, can share what was your highest bank loan for housing? Has it ever came up to above 2.6% and can you do early repayment for your house if you use a bank loan? Im afraid that the rates may go higher than 2.6% in the future.
HDB concessionary loans have been pegged to CPF OA since March 1986.
However, before 2003, HDB owners were given a choice between HDB Concessionary Loan and HDB Market Interest Rate.
This is why some HDB loan holders are actually paying more than the 2.6% that has held firm for over 20 years.
HDB Market Interest Rate is calculated using a formula as per the above link, and is currently standing at 3.16%.
Those still on this rate unfortunately made their choice when they took the loan. Currently their loan is left with no more than 8 years and a small outstanding amount. It may not be prudent to refinance small outstanding amounts as there will be more costs incurred than saved.
We should also point out that the HDB Concessionary Loan is not a fixed rate. As already mentioned above, it is pegged to 0.1% above the minimum CPF OA interest rate and since CPF OA has not changed since 1999, this means that the rate has not changed in more than 20 years.
But this does not mean it will _never _change.
For more insight on the HDB loan and bank loan comparison, you can either look up Seedly's fantastic guide:
Or if you like, you can check out our own blog post:
Thank you for reading this far!
Paydown is possible after the locked in period but depends on the bank loan structure. I went for private bank loan and interest is now less than 1.1%? The highest it went was still less than HDB's 2.6% ard 1.8%? Repricing is a strategy if you take private bank loans and are worried interest rate might go up in future.. but currently a low interest rate enivronment seems quite persistent. That said its not logical to paydown your mortgage if you can use the money to earn higher returns elsewhere.
HDB loan does have its pros such as higher LTV, no penalty for early paydown, and you can switch to private bank loan anytime. But in current monetary env.. unless u really cannot afford the downpayment, it is probably better to take up private loans. Even fixed rate loans have a lower rate than hdb rate now..
Talk to a few mortgage advisors from different banks... source around for the best deal. They will be more than willing to help answer any of your concerns or queries.