Those buying new and resale HDB flats can pick between an HDB loan or a bank loan, such as a Hong Leong home loan, to finance their purchase. To help homebuyers make an informed choice when deciding on which loan to go with, here are some key differences between opting for an HDB loan and a bank loan:
The HDB loan gives borrowers a concessionary interest rate pegged at 0.10% above the prevailing CPF Ordinary Account (OA) interest rate. HDB's concessionary interest rate can be changed to reflect CPF interest rate revisions in January, April, July, and October every year.
As of 30 September 2024,
HDB's concessionary interest rate is set at 2.60% p.a. In contrast, bank loan interest rates are currently higher than 2.60% p.a as of 20 August 2024, taking into account fluctuations in market conditions.
Another key difference between taking on an HDB loan and a bank loan is how the loan's downpayment can be paid. Both the HDB loan and bank loan require borrowers to pay a 25% downpayment of the property purchase price. Those who take on a bank loan need to pay at least 5% of the downpayment in cash, while those who opt for an HDB loan can pay the downpayment entirely using savings from their CPF Ordinary Account.
All in all, an HDB loan is known for its higher stability and relatively lower interest rates, while bank loans are known for their flexibility and potential for lower interest rates under favourable market conditions. Homebuyers in search of a home loan to finance their home purchase should consider their financial goals and risk tolerance before picking a loan that fits them.
