Asked by Anonymous
Asked on 24 Apr 2018
if you can afford to get a bank loan for your first property (meaning you can afford the 5% cash deposit) AND you know you will sell and buy another HDB property again in future, consider taking bank loan now because you can only use HDB loan facilities only 2x.
HDB loan DOES NOT have any minimum loan amount required, while Bank loans have a minimum of $100,000 loan amount.
so you should consider the fact that when you are in your 40s/50s, you will be better off if you have the opportunity to use HDB loan again. because at the age of 48-52, who wants to move to a bigger/smaller flat and still take $100,000 loan and have to service it till 65-67?
not typical, but common pattern of home ownership due to income strength during your lifetime:
25-35yo - first home 3 or 4rm flat
35-45yo - second home , usually an upgrade to 5rm or maisonette
45-52yo - final retirement home , usually a downgrade back to 3 or 4rm
if during the 45-52yo stage, you just want to have a small space for yourself and be able to fully pay for the flat. but not everyone can afford this, and sometimes you just need a $30-50k loan to cover the home purchase price.
what if you've already used your HDB loan for your first two houses? then you'll be stuck with bank loan being your only option. and you have to take out a minimum $100k loan and you only have 10-12yrs to clear off that loan. most of the time you'll not proceed as the monthly payments will be crazy high, and that means you can't downgrade to your retirement home and you can't cash out comfortably.
so plan your HDB loan usage wisely as its almost a priviledge to be able to use it in singapore (fixed rates & no minimum amout).
also plan your loans and CPF savings wisely so that you can fully pay off whatever property you live in before you hit 55yo and your CPF OA contribution rate drops and you can't afford to service your loan using your CPF fully.
This is a very common question! :)
While each has their pros and cons, here are a few insights:
HDB Loan - Currently 2.6% ( 0.1% above the CPF Ordinary Account interest rate.)
Bank Loan - Currently 1.3% - 2.4% (Depends on the bank and benchmark, interest rates fluctuates)
HDB Loan - CPF/Cash
Bank Loan - at least 5% in cash The rest using CPF OA savings
_HDB Loan__ - _New flats: 90% of the purchase price.
Resale flats: 90% of the resale price or market valuation, whichever is lower.
Bank Loan - 80% of the purchase price.** **
Late Payment Penalty:
HDB - Currently 7.5% per annum
Bank Loan - Depends on individual banks. Usually less lenient than HDB.
You can read the guide to your question here.