For many homeowners in Singapore, the HDB concessionary loan provides stability and familiarity. However, as interest rates change, refinancing to a bank loan can lead to substantial savings and more flexibility. This guide explores the key benefits, considerations, and strategies behind switching from an HDB loan to a bank loan.
💡 Why Homeowners Consider Refinancing from HDB to a Bank Loan
HDB loans have long been viewed as a safe and predictable option. They set the rate at 0.1% above the CPF Ordinary Account (OA) interest rate, which currently stands at 2.6% per annum.
As the mortgage market gets more competitive, bank home loans can offer lower interest rates. This is especially true for loans linked to SORA (Singapore Overnight Rate Average). These loans may help you save money. When SORA rate starts declining, fixed home loan rates follow suits as well.
Comparison: HDB Loan vs Bank Loan (as of 2025)
| Feature | HDB Loan | Bank Loan |
| Interest Rate | Fixed at 2.6% p.a. | From ~1.55% – 2.3% p.a. (floating or fixed) depending on loan quantum |
| Downpayment Requirement | Minimum 25% (can use CPF) | Minimum 25% (5% cash + 20% CPF/cash) |
| Loan-to-Value (LTV) Limit | Up to 75% | Up to 75% |
| Lock-in Period | None | 2–5 years (commonly) |
| Early Repayment Penalty | None | Usually 1.5% of the outstanding loan |
| Refinancing Flexibility | Only to bank loan | Can refinance again to other banks |
Potential Interest Savings Example
Let’s illustrate this with an example:
| Details | HDB Loan 2.6% | Bank Loan 1.60% |
| Outstanding Loan | $400,000 | $400,000 |
| Remaining Tenure | 25 years | 25 years |
| Monthly Repayment | ~$1,815 | ~$1,619 |
| Monthly Savings | – | ≈ $196 |
| Total Savings (Over 3 Years) | – | ≈ $7,056 |
✅ A 1% reduction in interest rate can translate into thousands in savings over a 3-year tenure.
Additional Benefits of Refinancing to a Bank Loan
1. Lower Interest Rate Options
Analysts expect the SORA rate to stabilize or drop a bit more by the end of 2025. Bank loans now offer rates around 1.6%. This makes them much cheaper than HDB’s rate of 2.6%.
2. Flexibility to Refinance Again
Once you move to a bank, you can reprice or refinance with other banks every few years to enjoy new promotional rates.
3. Tailored Packages
Banks offer both fixed and floating rate options, giving you control to match your risk appetite and financial goals.
4. Shorter Lock-in Periods
Many banks offer packages that waive penalties for selling or making partial prepayments. This is great for people who might sell or upgrade their property soon. It also helps those who want to make a lump sum payment to reduce their loan balance.
Key Considerations Before Switching
1. Credit Assessment & TDSR Compliance
Refinancing to a bank loan means going through a full credit check. This is done under the Total Debt Servicing Ratio (TDSR) rules. These rules limit total monthly debt to 55% of your gross income. Exemption of 55% TDSR may also be applicable, subject to the credit’s consideration.
2. Refinancing Costs
Expect legal and valuation fees (~$1,700), though many banks offer subsidies or cash rebates to offset these expenses.
3. Loss of HDB Loan Benefits
Once refinanced to a bank, you cannot switch back to an HDB loan.
4. Interest Rate Fluctuations
Floating rates can vary with market conditions. Choosing between fixed or floating depends on your outlook and comfort level with potential rate movements.
When Refinancing Makes the Most Sense
You should consider refinancing when:
- You have a stable income to meet the bank’s credit criteria
- Your HDB loan balance exceeds $200,000
- Market rates are significantly lower than 2.6%
🤝 How IQrate Can Help
Refinancing is not only about getting the lowest rate. Also, matching your mortgage plan with your financial goals is important.
At IQrate, our mortgage brokers look at the latest bank packages. They calculate your breakeven timeline. They also guide you from approval to completion. This ensures a smooth move from HDB to a bank loan while saving you money.