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? - Seedly
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Tan YB

Asked on 10 Jun 2018

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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Christopher How

Christopher How

Level 4. Prodigy

Answered on 11 Jun 2018

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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Rave Ong Ci De

Rave Ong Ci De

Level 6. Master

Answered on 18 Jun 2018

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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Teo Li Hao

Teo Li Hao

Level 2. Rookie

Answered on 12 Jun 2018

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

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Andrew Lim

Andrew Lim

Level 2. Rookie

Answered on 12 Jun 2018

i will think HDB loans if you are looking for 20 years period.. bank loans are more for 10 years or less (less risk in interest fluctuations)? CPF earns interest, so keep some inside....for retirement

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Alan Seow

Alan Seow

Level 3. Wonderkid

Answered on 11 Jun 2018

If you feel interest rates would go up. I suggest a HDB loan. If you were to go for a bank loan. I suggest having a fixed interest rate loan for the first few years for certainty of cashflow.

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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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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.​​​

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Nicholas Chan

Nicholas Chan

Level 6. Master

Answered on 21 Sep 2018

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

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Hi there, would recommend you to take up HDB loan (2.6%) instead of wipping out your CPF OA account if you can. Keep at least 20,000K in your CPF OA account as interest rates will be at 3.5% instead of 2.5% when CPF-OA account drops below 20,000K.

3.5%-2.6%=0.9%

With that you can actually be "earning" 0.9% with the remaining amount in your OA account to "pay off" your HDB loan.

Hope it helps :)

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Chris Chin

Chris Chin

Level 5. Genius

Updated on 07 Jun 2019

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

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Sean Tan
Sean Tan

22 Oct 2018

Can you pay down payment totally by CPF? Totally avoid paying cash?
Patrick Wee B.Sc. CCMFP
Patrick Wee B.Sc. CCMFP

29 Jun 2020

@Chris Chin. While I agree with most that HDB loan is better. Yours is the real reason why I do. Even tho the 2 Nicholas’ are right that bank loans are “cheaper” FOR NOW. However, I always invest in a property if I feel I can handle a interest hike of up to 5% (this is because the record high was 13%+ fleetingly) and anything below that is a bonus to your cash / CPF OA outlay. I don’t consider HDB an investment class property cos u can only buy 1. But having said that you should buy / own one as it’s the cheapest psf / outlay to have a roof over your heads. And use the spare cash to own another one for investment or eventual own stay and cash out your HDB Also I know of a bankrupt who owned more than 10properties and while his 5 were foreclosed, he still had his HDB and 4 others in parent’s / in-laws / aunts & uncles names. So you are absolutely right. Even if he had all his Pte properties taken away. He will still have his HDB to live in and not have to sleep in the streets.
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