Loans, CPF or cash: How should you pay for your HDB flat?

payment guide for buying a hdb flat in singapore - cash, cpf, bank loan

If you’ve ever looked at HDB home prices in Singapore and thought, “How can?!“, we’re right there with you.

A better starting point would be how to afford a home.

There are multiple ways and combinations with which you can pay for your HDB flat; and working out which method is best for you can help you better figure out your finances for home-buying.

We’ve broken it down for you into an easy-to-follow (or easier, at least) guide:

Financing your HDB flat

1. Using CPF
2. Using cash
3. Using loans

Using CPF to pay for your home

how to buy house in singapore using cpf

First things first…

How much CPF CAN you use to buy your home?

Your CPF can be used to finance both the downpayment of your home (an upfront payment when you purchase the property), as well as to pay off your home loan instalments.


The downpayment for a HDB flat is:

  • 10% of the purchase price (for flats with HDB loan)
  • 25% of the purchase price (for flats with bank loan); of which at least 5% must be paid in cash, with the option to pay remainder 20% with CPF.

Home loan repayments

When it comes to repaying your home loan with CPF, here’s when it gets a wee bit trickier.

There’s a certain CPF Withdrawal Limit for home loan repayments, subjected to your flat type and type of loan you take up. And because of interest rates over a long repayment period, there’s a real possibility of reaching these limits before your home is fully paid for:

  • Valuation Limit: The current property value or the purchase price of the property, whichever is lower (E.g. if your property is valued at $500k but you are buying it for $600k, valuation limit would be set at $500k):
    • Once you hit the Valuation Limit, If you’re under 55, you can use your remaining CPF savings to finance your home loan up to the Withdrawal Limit ONLY IF you meet the Basic Retirement Sum (BRS) in your Ordinary Account and Special Account. If you’re 55 or over, you would also need to meet the minimum sum in your Retirement Account.
  • Withdrawal Limit: 120% of the Valuation Limit
    • Once you hit the Withdrawal Limit, you’ll have to repay the rest of your home loan in cash only.

*Limits are inclusive of downpayment

The only exception: If you’re BTO-ing, you can use everything in your CPF to repay your HDB loan. Don’t have this limit, that limit!

Now, there’s also the question of…

How much CPF SHOULD you use to buy your home?

Using your CPF to finance your HDB flat will give you more cash on hand, and more flexibility in terms of how you use your money.

If you see yourself using your cash savings for other investments with high returns, using your CPF to repay your home loans would be a wise option.

Using cash to pay for your home

how to buy house in singapore using bank savings

Notice we say that you should use your CPF to pay for your home only if you’re using cash for investments with high returns.

That’s because the money in your CPF Account also gets you fairly high returns simply by, well, being in your CPF Account.

Your CPF savings earn a risk-free interest of 2.5% per year (in comparison, the base interest rate of your bank savings accounts are typically about 0.1-0.2%).

Paying for your home with your cash savings means you could be growing your CPF monies with a peace of mind.

Here’s a case example for using cash instead of CPF to pay for your home:

cash vs cpf how to finance your hdb flat singapore

By repaying your home loans in cash and letting the interest accrue in your CPF Account, you would’ve earned close to $100,000 over the course of your loan repayment period.

Using loans to pay for your home

how to buy house in singapore using housing loan

Now that you probably have a better idea of whether you should be using CPF or cash for your HDB flat’s downpayment and loan repayments, the next question is…

What loans?

As much as a HDB loan seems like the de facto option (it’s called a HDB loan for a reason…), you actually have a choice between a HDB loan and a bank loan for financing your HDB flat.

Here are a few key differences:


  • HDB loan: More restrictive – at least one buyer must be a Singapore Citizen, your monthly household income must not exceed $14,000 (or $7,000) for singles, you can’t own any other house locally or overseas, and can’t have taken more than 2 previous HDB loans.
  • Bank loan: Less restrictive – both Singaporeans and non-Singaporeans can apply; from there, the bank will run a credit check to access your eligibility based on your credit history, etc.

Maximum loan amount

  • HDB loan: Up to 90% of your HDB flat’s value. The remaining 10% must be paid as downpayment (cash or CPF)
  • Bank loan: Up to 75% of your HDB flat’s value. The remaining 25% must be paid as downpayment (of which at least 5% must be paid in cash, and the other 20% can be in either cash or CPF)

Interest rate

  • HDB loan: 2.6% per annum (fixed at 0.1% above CPF Ordinary Account interest rate, which doesn’t change much from the current 2.5%)
  • Bank loan: Fixed rates of 1.3% – 1.7% for the first 2-5 years, with various options of interest rate schemes thereafter. (Historically, bank loan interest rates hovers between 3 to 4% per annum – higher than the HDB loan’s interest rate of 2.6%. The current low interest rates of 1.x% are the result of the 2008 financial crisis, although the economy is recovering and interest rates are predicted to continually increase.)

Early repayment

  • HDB loan: No penalty, so if you strike 4D, feel free to pay off your home loan immediately to minimize interest paid
  • Bank loan: 1.5% penalty

Late repayment

  • HDB loan: 7.5% per year
  • Bank loan: Depends on bank, but usually heavier penalties than HDB loan

In other words, you might prefer a HDB loan over a bank loan if you’re:

  • Risk-averse. On the other hand, with a bank loan, you’re guaranteed a certain interest rate for 5 of years at best. Beyond that, you’re at the mercy of the economy. This could be a nightmare, especially if interest rates skyrocket and your loan repayment period is long.
  • Confident of financial growth in the near future. Once your earning power increases (or, you know, once you strike TOTO), you can opt for early repayment with no penalties, and minimize the amount of interest you’ll have to pay.
  • Looking for flexibility. After taking up a HDB loan, you can still take up a bank loan to finance your HDB loan if you find that a bank loan makes more financial sense. If you were to take up a bank loan, however, you can’t convert it to a HDB loan.

On the flipside, you might prefer a bank loan if you’re:

  • Not eligible for a HDB loan. Ok this is more like you have no choice, but hey, bank loans aren’t bad.
  • Willing to take the risk. And you’re confident that bank interest rates will continue to stay low. Or relatively lower than HDB loan interest rates at least.

Loans, CPF or cash?

Now, you’ve got a better idea of how to pay for your HDB flat (and hopefully, you’re convinced that you can actually afford one, given the variety of financing options available).

Leave any other tips and tricks in the comments below, or read this article for financing options for a condo or private property in Singapore!

cheap hdb flats and condos for sale in singapore


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