Property ownership is a significant milestone in life. It is a symbol of success. It is a lifetime commitment. It is also likely to be your most expensive purchase. Knowing that real estate is one of the biggest assets and can become a liability to an investor without proper management. We can help you make it one of your best investments. Together, let us build your dream home.To start, we need to consider the type of loan that you will take out – either an HDB loan or a bank loan. They vary in several aspects, so having a good understanding of both is essential in deciding which of the two to go for.
Enquire Now| HDB Loan (BTO/RESALE HDB) | Bank Loan (PTE & RESALE) | |
|---|---|---|
| Percentage of loan | Up to 75% | Up to 75% |
| Loan Tenure | Up to 25 years | Up to 30 years |
| Interest Rate | Floating (CPF Ordinary Account interest rate + 0.1%) | Floating / Fixed |
| Loan Refinancing | Can refinance to bank loan | Cannot Refinance to HDB loan |
| CPF Usage | Property owners can keep up to $20,000 in their CPF Ordinary Account. The remaining CPF OA balance have to be utilised towards downpayment. |
Keep up to any amount |
| Cash Required | For BTO: $0. For Resale HDB: You must pay the sellers a cash deposit ($2 to $5,000), which consists of the Option Fee and Option Exercise Fee, during the granting and exercising of the Option to Purchase respectively. |
Minimum 5% cash required |
| Early Repayment Penalty | - | May incur up to 1.5% early repayment penalty |
For HDB loans, the interest rate is currently 2.6%. The HDB Loan Interest Rate is pegged to our CPF Ordinary Account interest rate + 0.1%, which translates to 2.5% + 0.1% = 2.6%. This rate has been as such for the past 16 years and does not seem to be changing anytime shortly. Hence, should you take out an HDB loan, you will essentially be paying the same amount every month.
For Bank loans, you can pick between fixed and floating rates. Fixed rates are very stable, whereas floating rates are variable. Whether to opt for fixed rates or floating rates depends on what you want and which suits your needs best. Are you a risk-averse person who doesn’t mind paying more for peace of mind? Or are you someone who prefers to go with the market flow and perhaps reap certain savings along the way?
For HDB loans, you can take out a loan of up to 75% if the remaining lease of the property can cover the youngest buyer until at least age 95, even if the remaining lease of the flat is less than 60 years. (Otherwise, the Loan-to-Value limit of 75% will be pro-rated.) As for the remaining 25%, you may use the monies in your CPF Ordinary Account
For Bank loans, you can only take out a loan of up to 75%, which means that you have to pay a higher down payment sum – the remaining 25% – by your efforts, of which 5% has to be in cash.
Flat buyers taking a HDB loan from HDB have the option of retaining up to $20,000 of the available CPF savings in each buyer's OA. The remaining balance in the CPF OA must be used to pay for the flat purchase, before they can take an HDB housing loan.
On the other hand, property owners taking out a bank loan have the option of choosing not to touch their CPF savings at all and leave the funds in the CPF Ordinary Account to earn the accrued interest.
Overall, these factors of consideration have to be taken into account when buying your new house. You will have to evaluate your lifestyle choices, your approach to risk management, and your financial status to determine the first step of your property purchase story.
Sounds too complex for you to make a choice between HDB loan or Bank Loans, contact our team of Mortgage Specialists to assist you with making the right choice to suit your needs.