Type of Home Loans
If you’re purchasing a HDB flat, you can choose to opt for a HDB loan or a bank loan. The main differences are the down payment required, interest rates, as well as the flexibility to pay off your loan early. Check out this table to compare both types of loans:
|HDB Loan||Bank Loan|
|Down payment||15% upfront||Depends on the number of property loans you have.|
|LTV Limit||Up to 80%||Up to 75%|
|Total Debt Servicing Ratio (TDSR)||N.A.||55%|
|Mortgage Servicing Ratio (MSR)||30%|
|Interest Rates||Fixed at 0.1% above the prevailing CPF interest rate. Reviewed quarterly||Fixed / Floating|
|Maximum Loan Period||25 years||30 years for HDB flat; 35 years for private properties|
|Chargeable fees / Penalties||No penalty for early repayment||May incur fees for early repayment and refinancing within lock-in period|
How does home loan interest compound?
If you choose a HDB loan, your interest rate will be revised based on the revision of CPF interest rates (pegged at 0.1% above the CPF Ordinary Account interest rates).
However, if you choose a bank loan, there are two main types of loans, which would change how much interest you pay : Fixed rate loans and Floating Loans:
|Floating loan||Fixed rate loan|
The typical method of calculating interest is monthly reduction. As such, even a small increase or decrease in interest rates can affect your monthly instalment and the effective interest rate that you end up paying for your home loan.
As such, even if you’re eligible for a larger or longer loan, you should think twice before taking it up, unless you’re sure you have the resources to fund it.
Who is eligible
Banks and financial institutions have their own eligibility criteria to determine who is eligible and what rates you’ll get. These include:
- Minimum monthly income
- Buyer’s age
- Loan quantum
- Residency status
- Fulfilment of the Monetary Authority of Singapore’s property loan rules and HDB’s/the bank’s internal credit requirements
- Credit score (e.g., TDSR & MSR)
Not sure if you’re eligible for a home loan? Need help finding the best home loan for you? Contact us here and our home loan experts will reach out to you, or compare between the most attractive home loans here.