Should I get a HDB or Bank loan if I’m buying a HDB flat?

Should I get a HDB or Bank loan if I’m buying a HDB flat?

Buying a HDB flat for the first time can be an intimidating experience. It’s probably the first big ticket purchase in your life that will take the next couple of decades to pay off, so you’d definitely want to rake in as much savings as you can.

Perhaps you have not really thought about what kind of loan to take up. If you don’t already know, you have a choice between taking up a HDB or bank loan, as long as you are eligible for them.

You might want to hold on to your cash and pay off your home loans using your CPF, but did you know that taking up a bank loan allows you to pay less interest? This is because bank interest rates are lower as compared to the CPF Ordinary Account (OA) interest rate which home loans are pegged to.

And while the down payment required to take up a bank loan may be higher – at 20%, with at least 5% paid in cash as compared to 10% with a HDB loan, fully payable with your CPF –you get to enjoy greater flexibility in retaining your savings in your CPF OA. Conversely, upon the collection of keys to your new home, HDB will wipe out your CPF OA balance to reduce the loan quantum required for you to service.

In the following infographic, we run through the main factors to consider while taking up a home loan for your HDB flat, and the main differences between taking up a HDB loan and a bank loan.

Should I get a HDB or Bank loan if I'm buying a HDB flat?

 

tedchong

Ted is an advocate of content, marketer for SMEs and experimenter in digital strategies. He blogs over at Ice Cube Asia. Go over and say hello to him!

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