The Independent

Is HDB Loan Refinancing a Good Idea?


If you are reading this article, you’d probably have already taken an HDB loan for your house, but are now wondering whether you made the right choice. You want to know if refinancing an HDB loan with a bank loan is worth the effort. Don’t worry, we have the right information for you! Let’s first look at the pros and cons of both kind of loans:

Advantages and disadvantages of HDB loan

The key benefits of taking an HDB loan are:

The main disadvantage of an HDB loan is that your loan tenure cannot be longer than 25 years. If you want a longer tenure and smaller EMI, HDB loans aren’t an ideal product for you. Apart from this, there are several eligibility-related terms of HDB loans, but that is not pertinent to the topic.

Related: What You Should Do About Your Home Loan if the SIBOR is on the Rise

Advantages and disadvantages of bank loan

Let’s look at the benefits of a bank loan in comparison with HDB loans:

The points where bank home loans are not very attractive are:

You may also like: Switching Home Loans – Why Do It?

When does HDB loan refinancing make sense?

Before you decide to refinance your HDB loan with a bank, ask the following questions:

Depending on your answers to the above questions, you can decide whether you should refinance your HDB loan or not. We suggest that you refinance your HDB loan with a bank if the EMI and effective interest rate on the bank loan are lower, and you would be allowed to make prepayments without incurring additional charges. However, remember that you won’t be able to switch back to an HDB loan once you refinance it with a bank loan, and banks will be stricter in enforcing your payment obligations.

Let’s illustrate this with the POSB HDB Loan, which offers:

According to POSB, you could save between S$2,374 to S$9,940 per year by choosing to refinance the HDB loan of S$500,000. However, after the first 5 years, the interest rate would revert to a floating rate based on the DBS benchmark rate, which might make the loan costlier later if the benchmark rates go up. If you’re ready to take this risk, then refinancing with the POSB HDB Loan could be an attractive option for you.

The bottom line? Stick to your HDB loan if you want to take less risk and prefer stability. But if you’re willing to take moderate risks and experiment, and if the bank is offering lower interest rates than your current HDB loan, then go ahead and refinance your home loan with a bank.

Would you consider refinancing your HDB loan? Let us know your thoughts in the comments below.

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