If you are buying a HDB flat and still thinking, you should go with HDB loan or Bank loan. you should read this article. Check your eligibility of HDB loan here.
1. required downpayment & Loan to value
HDB Loan maximum loan up to 80%, your downpayment required 20% cash or CPF OA fund.
Bank Loan maximum loan up to 75% only, your downpayment required minimum 5% cash + 20% CPF OA.
HDB loan is using 3% to compute the maximum qualified loan. Buyer can use maximum 30% MSR (Mortgage Servicing Ratio) of their income to pay monthly mortgage instalment.
Bank loan is using 4% to compute the maximum qualified loan. Buyer can use maximum 30% of their income or 55% Total Debt Servicing Ratio, whichever is lower amount to pay monthly mortgage instalment
What is MSR and TDSR? Please read more here.
If you are would like to find out more about your qualified loan amount, please contact me directly.
2. CPF OA fund Usage
Buyer who take an HDB housing loan have the option of retaining up to $20,000 (each buyer) in their Ordinary Account (OA), with the remainder going towards their housing payment.
Buyer taking a bank loan can choose to retain any amount in their OA.
3. Interest rate
Bank loan interest rate is depends on the bank loan package you sign. It can fixed or floating rate. Currently (Mar 2023), bank loan interest rate is at the level of 3-4%.
HDB loan interest rate is fixed at 2.6%.
Below illustration is the difference of the monthly instalment $3167 vs $2722, difference of $445. That is $5340 per year. In this case, why people still take bank loan? If you have large amount of CPF Fund in OA that can earn 2.5% interest or more, you can do the sum comparison yourself whether you should take HDB loan and use up all the CPF OA Fund or leverage on bank loan. Do take note that you need to refund the CPF OA fund plus accrued interest interest when you sell off your HDB flat.
For buyer who take HDB loan wish to refinance to bank loan, please take note that if the outstanding loan amount is less than $300k, bank probably will not want to take your case.
For buyer who take bank loan wish to refinance to other bank loan, please take note that you might have penalty fee incurred or can only do so after lock-in period. You are not allowed to switch to HDB loan.
Every Singaporean has two chances of taking HDB loan. Please plan carefully. Should you require more professional advice, feel free to contact me for a coffee chat.
*Disclaimer: This article is for reference purpose only.