One common problem that faced by every home buyer when buying a property in Singapore is the choice between HDB home loans and bank loans. Today, the number of HDB apartments are growing in Singapore for example in Bukit Panjang. Many Singaporean couples or younger generations who start buying their HDB apartment often get surprised when they learn that banks charge much lower interest rates than HDB loans. Let’s take a closer look at the key differences between HDB loans and bank loans and which one is better.
- HDB loans have higher interest rates than bank loans
One of the main and key differences between the two is the interest rate. HDB Concessionary Loans have a very simple formula as the interest rate is the prevailing CPF Ordinary Account (OA) interest rate, plus 0.1%. This comes to about 2.6% per annum, a rate that has remained unchanged for a long period. As mentioned, the HDB loan interest rate is 2.6%, and rarely changes. Bank rates are more inconstant because they are based on current SIBOR and SOR rates, which are usually cheaper. Bank interest rates normally range between 1.6% to 2.05%. Therefore, it is true that the banks are able to offer a lower initial advertised interest rate compared to the HDB loan. If homeowners are confident to secure this advertised interest rate for the duration of the loan period, then a bank loan will certainly be better than a HDB loan.