Considering HDB loan vs bank loan is most probably the second thing many first-time homeowners have on their minds, after figuring out where their first home should be. Overwhelmed with all the jargon and fine print? Don't worry, we're here to break down the differences between HDB loans and bank loans. A huge advantage of taking an HDB loan is...
Considering HDB loan vs bank loan is most probably the second thing many first-time homeowners have on their minds, after figuring out where their first home should be.
On the other hand, the maximum LTV ratio for bank loans is 75 per cent. This translates to an extra five per cent in downpayment. This applies to loan packages that are pegged to fixed interest rates as well. After a lock-in period of two to five years, these so-called fixed-rate home loans follow a floating rate.Bank loan interest rates are mainly determined by these three floating rate benchmarks:
This means that if you have a 1M SORA rate home loan, the loan repayment amount will change every month. If you have a 3M SORA rate home loan, the loan repayment amount will change every three months, and so forth. However, due to the Global Financial Crisis in 2008, bank interest rates have been at record lows for several years. It was only in 2015 to 2016 that interest rates started going up again, leading to a high of 2.88 per cent in 2019.
When interest rates are lower than HDB's concessionary rate , taking a bank loan can be cheaper due to the lower monthly instalments.Here’s an example. However, you can't refinance your bank loan into an HDB loan. What you can do is reprice it with the same bank or switch to another bank to refinance it.HDB charges for late payments of monthly instalments and reviews the rate annually. From April 1, 2022 to March 31, 2023, the rate is 7.5 per cent per annum. It's reviewed annually in April.
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