Table of Contents
Executive Summary: Why This Guide Matters for Singapore Buyers
Buying your first home in Singapore is exciting but risky without understanding the affecting factors. First time buyers mistakes like ignoring TDSR limits to picking the wrong loan can add tens of thousands to costs. HDB data shows average resale flats at S$500,000-S$800,000 in 2025, with mortgages spanning 25-30 years.
This pillar also covers the CPF usage and understanding our affordability so as to plan the purchase, while avoiding mistakes.
Trap 1: Not Understanding HDB Loan vs Current Bank Loan
Many first-timers grab the first loan offered, unaware HDB loans cap at 2.6% interest (pegged to CPF OA rate +0.1%) while bank loans offer fixed or floating rates, e.g., pegged to SORA, subject to market fluctuations. HDB loan provides stability while bank loan offer flexibility but subject to market rates.
HDB loan-to-value (LTV) of 75% is the maximum loan amount you can get for an HDB flat, whereby 25% downpayment has to be of Cash/CPF. Banks LTV is of 75% while 5% cash is the minimum required for the downpayment. Mistake: Opting for bank loans without comparing could cost more than S$50,000 over 25 years.
HDB Loan vs Bank Loan Comparison Table
| Feature | HDB Loan | Bank Loan |
|---|---|---|
| Interest Rate (2025) | 2.6% fixed | ~1.25% SORA-based |
| Loan-To-Value (LTV) | 75% | 75% |
| Downpayment | 25% (CPF/cash) | 25% (5% cash) |
| Best For | HDB buyers seeking stability | All properties, flexibility |
Trap 2: Ignoring MSR and TDSR Limits
MSR (Mortgage Servicing Ratio is 30% for HDB) and TDSR (Total Debt Servicing Ratio is 55% of gross income) are MAS rules. Example: S$5,000 monthly income limits HDB mortgage to S$1,500 monthly payment based on MSR. Ignoring these over-leverages you, risking rejection or distress.
Trap 3: Choosing the Wrong Loan Tenure
Shorter tenure (20 years) mean higher monthly instalment but less interest (S$100,000 saved vs 30 years on S$500,000 loan at 3%). Longer tenure ease cashflow but will cost more in the long-term. Pitfall: Picking 30 years without proper planning.
Trap 4: Misjudging CPF Usage Rules
CPF OA is typically used for downpayment and/or monthly instalment but is capped when CPF used hits the Withdrawal limit or Valuation limit of the house. Pitfall: Overusing CPF and leaving no buffer.
Trap 5: Emotional Buying Without Affordability Check
While desired to own a bigger space which normally equates to higher price, this emotional feeling always tend to easily overlook the family's financial affordability.
Frequently Asked Questions
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