Asked by Tan YB

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 5. Genius
    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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  • Teo See Hwa
    Teo See Hwa, MArketing Associate at Propnex
    Level 3. Wonderkid
    Answered on 09 Oct 2018

    Which is the better loan option to take for HDB BTO?

    Ans: Need to know 1st BTO or 2rd BTO than can advise HDB or Bank Loan.

    What is the typical loan amount as a % of property price?

    Ans: Same as above than can advise.

    If one has ability to pay up for the property, should one do so and reduce the % of property price that is using loans?

    Ans: Know what happen when you buy 2rd BTO will help you decide the %.

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  • Nicholas Chan
    Nicholas Chan
    Level 5. Genius
    Answered on 21 Sep 2018

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

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  • Amanda Ho
    Amanda Ho, Financial Planner at AXA
    Level 2. Rookie
    Answered on 21 Sep 2018

    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 3. Wonderkid
    Answered on 19 Jul 2018

    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
      Can you pay down payment totally by CPF? Totally avoid paying cash?
      22 Oct 2018