Bank loan for HDB flat: A step-by-step guide

By Beansprout • 10 May 2023 • 0 min read

Thinking of getting a bank loan for your HDB flat? Don't make a move before reading our comprehensive breakdown of the key factors you should keep in mind.

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Getting a home loan is part of the rite of passage for Singaporeans looking to purchase their HDB flat.

A common question faced by homebuyers is whether to go for a bank loan or HDB loan.

A HDB loan may appear to be more attractive than a bank loan for most homebuyers at current interest rates. 

BUT! Do you know that there may be instances when you may not be eligible for a HDB loan?

If you do not have an exact answer for the above question, then this step-by-step guide will walk you through what you’ll need to do to still own your dream home! (in the most understandable manner!) 

When are you not eligible for a HDB loan?

#1 – Your income is above the income ceiling

According to HDB income guidelines, there is a monthly household income ceiling of $14,000 for HDB loan applications undertaken by families.

Take note that this $14,000 ceiling does not take into account bonuses and income earned from ad-hoc overtime work.

But it includes allowances you receive regularly e.g. phone allowance (yes you, people with work phones!) 

For fellow salaried employees like me, please note that the gross monthly income is an average of your last 3 months of pay.

Yes, you should probably do some math (and look at your payslips if you haven’t been doing so) before applying! 

Source: HDB

#2 – You’ve taken more than two HDB loans

There are other eligibility conditions which may also disqualify you from taking out a HDB loan.

For instance, if you have previously taken two housing loans from HDB, you will not be eligible for a third one.  

Source: HDB

Moreover, there are additional restrictions placed on seniors aged 55 years and above as well as singles aged 35 years and above.

For the former, they must not be applying for 2-room Flexi units with short leases or Community Care Apartments.

For the latter, they can only buy (i) 2-room Flexi BTO units (ii) any resale unit.

Failing which, HDB loans will not be granted to these groups of people.

Source: HDB


#3 Permanent Resident (PR) couple

Permanent Residents or PRs are not allowed to buy new HDB flats (unless your spouse is a Singaporean citizen).

However, this restriction does not extend to resale units.

This means that it is possible for a PR couple to buy a resale HDB flat.

But in order to be eligible for a HDB home loan, at least you or your spouse must be a Singaporean citizen.

A PR couple would therefore only be able to take out a bank loan for the purchase of their home.

Source: HDB

For a full breakdown of the eligibility criteria, you may check out the HDB website here.

What to do if you do not qualify for a HDB loan?

PANIC! Read on to find out how to take a bank loan in a true Singaporean fashion!

If you have yet to strike the TOTO like me, you probably need to apply for a loan in order to buy a house.

While housing is expensive in Singapore, the good news is you can still take a bank loan from a bank to meet your mortgage needs. 

Yay to ownership!

As a quick recap, the differences between a HDB loan and a bank loan are as follow:


HDB loan

Bank loan

Interest rate

(0.1% above CPF OA interest rate)

3.80% - 4.60% (fixed)
SORA + 1.00% (floating)

Max amount of loan you can borrow (LTV)



Down payment

20% either in cash or CPF

25%, of which 5% in cash and 20% in cash or CPF

Early repayment

No penalty

1.5% penalty

Late payment penalty

7.5% fees per annum

$80 late fees per repayment

Source: HDB and various bank websites as of May 2023

Step by step guide to taking a bank loan for HDB purchase

#1 – Calculate whether you can afford your bank loan

Firstly, we need to make sure that we can still afford the HDB flat purchase to and be financially capable to repay the mortgage. 

The HDB Flat portal allows you to find the latest interest rates offered by both HDB and various financial institutions.

For example, there was a mix of both fixed and floating rate packages offered by six banks shown. 


If you are new to housing loans, the floating rate is calculated using an interest rate benchmark such as the Singapore Overnight Rate Average (SORA). 

Let’s take a further look at the floating rate packages offered by the local banks. 

On our last check on 5 May 2023, UOB is offering the lowest floating rate amongst the 3 local banks with a rate of 3M Compounded SORA + 0.70% for the first and second year, and 3M Compounded SORA + 0.80% for the third year.

Based on the current 3M Compounded SORA of 3.6086% as of 9 May 2023, this would translate to a mortgage rate of 4.3% for the first and second year. 

You can find the latest SORA rates on the MAS’ website.  


HDB loan floating rate packages


Year 1 - 3M Compounded SORA + 0.70% p.a.

Year 2 - 3M Compounded SORA + 0.70% p.a.

Year 3 - 3M Compounded SORA + 0.80% p.a.

Year 4 & thereafter - 3M Compounded SORA + 1.00% p.a.


Year 1 & 2 - 3M SORA + 1.00% p.a. 

Year 3 & thereafter - 3M SORA + 1.00% p.a. 


Year 1 & 2 - 3M SORA + 0.98% p.a. 

Year 3 & thereafter - 3M SORA + 1.00% p.a. 

Source: Company websites as of 9 May 2023

Next, you can calculate whether you are able to afford the mortgage payments with the bank loan using a mortgage calculator. 

Essentially, this magical calculator can tell you the most important answer… which is how much do you need to pay monthly! 

PS. Because this is a magical tool, it can also tell you more stuff such as tenor of loan, as well as interest rates etc, 

Do try it out to make sure that you are able to meet the mortgage payments! The last thing you would want to do is to start worrying about your ability to repay the mortgage! 

#2 – Find out the estimated valuation of your HDB flat 

The next important step is to get an estimated valuation for your HDB flat.

This is a step which a lot of Singaporeans miss out, especially when some of us (erhem!) are buying flats without caring about valuation (and hoping that the prices will go up in the long run). 

If your purchase price is above the valuation of the HDB (also known as cash-over-valuation), you will NOT be able to get as much loan. 

This means that you need to fork out more cash, and this is not the most ideal scenario you want to be in!

To get an instant online property valuation in the comfort of your home, you can use one of the valuation services that’s available. 

The most important factor we’d consider when choosing a valuer is to make sure that the valuation is conducted by a professional valuer to ensure that it is credible. And of course it would be even better if it is free!

Amongst the various banks offering a HDB loan, the only one that offers an instant online valuation service offered by UOB. The good news is that the valuation can be accepted for your home loan application too.

#3 – Get your loan approved

After having done all the research, we’d need to get our bank loan approved. 

In the past, HDB flat buyers who wish to take out a loan with the bank will need to approach the individual banks to apply for an In-Principle Approval (IPA) and Letter of Offer (LO) separately. 

With the enhancements to the HDB flat portal, you can now take a step further to request an IPA and LO from the bank through the portal. 

If you are kiasu like us, you can concurrently request an IPA from the participating FIs to find out your eligibility for the housing loan when you apply for the HFE letter.

After all, it seems that your home loan can be improved instantly within minutes online. In this case, it might be worthwhile putting in your application anyway.


What would Beansprout do?

If you are buying a HDB flat and are looking at a bank loan, the new HDB flat portal aims to make your flat and loan application process easier by providing an integrated loan application service with the banks.

Our key considerations in choosing a bank loan would be the interest rate of the bank loan, certainty and speed of securing of a home loan. 

Most importantly, we’d want to do this in a way that doesn’t already add to the stress of purchasing a HDB flat! 

Do share with the Beansprout community if you come across any other tools and resources that were helpful in buying your dream home.

Photo credit: HDB

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