HDB Loans versus Bank Loans – Which is the Better Deal?
As well as all the traditional methods of getting a home loan, the HDB Loan further muddies the waters. They may not be for everyone (actually, the tight restrictions ensure that they certainly aren’t), but they do provide a genuine option, and it is definitely worth seeing if they are ideal for your circumstances.
First of all, you need to see if you are eligible for a HDB loan. There are several strict criteria that need to be met in order for someone to take one out:
- The loan can only be used to buy a HDB flat
- At least one of the people taking out the loan has to be a Singaporean citizen
- None of the buyers can have a private residence, either in Singapore, or overseas
- None of the buyers can have sold or otherwise disposed of any private residential property within 30 months prior to the loan application
- None of the buyers can have taken out more than two HDB loans previously
- The buyers’ monthly income cannot exceed $12,000, or $18,000 for extended families (this figure falls to $6,000 for single buyers purchasing a 5 room or smaller resale flat, or 2 room new flat in a non-mature estate under the SSC Scheme)
If and only if you fulfil all of these then you can decide if a HDB loan is the best option for you. The best way of looking at this, is to show the reasons why people do opt for this route.
The main reason that people go for this option is that they would prefer to deal with the HDB, than with the bank. This is because, whereas the bank will stop at (almost) nothing to get the money they are owed, the HDB will be a lot more flexible and forgiving if you have a hard time meeting the payments. Rightly or wrongly, there is the perception that the HDB will not take back the house if you cannot pay. That said, it is never a wise move to enter any loan agreement if you feel you will struggle to keep up with the repayments.
Another reason that people like to go for HDB loans is that it gives them a level of stability that is impossible through a bank loan. Even fixed rate bank loans will be for a maximum of 5 years. After that, the rate, even if you fix it for another 5 years will be effected by the general interest rate, and could be significantly higher than the rate you enjoyed for the initial 5 years. This isn’t the case with HDB loans, which instead of the SIBOR or SOR, is linked to the CPF. This means it hardly ever changes, which in turn means that those taking out a HDB loan can plan far into the future, safe in the knowledge they know what their repayments will be.
Talking of the CPF, that can be used to fund the down payment for a HDB loan. This avoids the necessity to suddenly stump up thousands of dollars in cash which will be the case with a bank loan. Finally, it is a lot easier – and cheaper – to pay off the loan earlier with the HDB, should your circumstances change for the better.
So with all these in their favour, why would people choose not to go with the HDB loan? It simply comes down to the cost. Bank loans more often than not offer a lot lower rates, meaning that they are ultimately cheaper. Of course, they are at the mercy of economic events, and they are forecasted to rise in the mid to long term.
Overall, the HDB offers a very good deal for those who qualify, are risk averse, and would rather be in the position of knowing their rate for the foreseeable future. For those who prefer to gamble slightly, savings are there to be made by opting for the bank loans, but like all gambles, they aren’t guaranteed.
New launch condo in the west
New launch condo in the east
New launch nearer to the city centre.