Why paying 2.6% on your HDB loan no longer makes sense
Sarah Tan
Financial planner and mother of two, helping Singapore families achieve financial independence.
•4 min read
MONEYPROPERTY
Paying 2.6% on your HDB loan no longer makes sense when bank rates are hovering around 1.5% to 1.8% — that’s nearly a full percentage point of savings on hundreds of thousands in loan balance. Over time, that difference can translate to tens of thousands in interest you could avoid simply by refinancing to a lower-rate bank loan.
See How Much You Can Save
The Problem With Sticking to 2.6%
When interest rates were high, a 2.6% loan was an excellent deal. Today, however, bank home loan packages are hovering around 1.6% to 1.9%, which means homeowners on HDB loans are effectively overpaying every single month.
On a $400,000 loan, the difference between 2.6% and 1.7% interest works out to roughly $175 less per month, or over $10,000 in savings across five years.
That’s real money — enough to cover part of your renovation, a family holiday, or even start an investment portfolio.
The Numbers Don't Lie
Based on an example of a $400,000 home loan:
| Loan Type | Interest Rate | Monthly Repayment | Annual Interest Paid |
|---|---|---|---|
| HDB Loan | 2.6% | ~$1,815 | ~$10,400 |
| Bank Loan | 1.7% | ~$1,640 | ~$8,200 |
Even a small difference in interest adds up over time. By refinancing from an HDB loan to a bank loan, you can potentially save more than $2,000 in interest every year.
Common Misconceptions About Refinancing
Many homeowners hesitate to switch because of lingering myths. Let’s clear them up.
“HDB loans are safer.”
Both HDB and bank loans are secured by your flat. The main difference is the lender — not the risk of losing your home. As long as you continue paying your mortgage, your home remains safe.
“Bank rates might go up.”
That’s true — but even if rates rise slightly, they’d still have to exceed 2.6% before you’d start losing out. Plus, you can always refinance or reprice again in a few years if the market changes, but you won't be able to move back to an HDB loan.
“Refinancing sounds complicated.”
It’s actually straightforward. Cashew and other mortgage brokers handle the comparison, paperwork, and coordination with banks at no cost to you.
What Is Refinancing, and How Does It Work?
Refinancing means moving your existing home loan from HDB to a bank that offers a lower interest rate. The process typically takes 6–8 weeks, and your monthly payments continue through CPF or your bank account just like before.
Most banks even offer subsidies to offset legal and valuation fees — so your upfront cost is minimal or even zero.
When Refinancing Makes Sense
You might want to consider refinancing if:
- You’ve had your HDB loan for more than a year
- You have a stable income and CPF contribution
- You plan to stay in your home for at least 2 years
- You want to reduce your monthly cash outflow
If these sound like you, switching to a lower-rate bank loan could be one of the smartest financial decisions you make this year.
Quick FAQ
Can I refinance back to HDB later?
No. Once you move to a bank loan, you can’t revert to an HDB loan.
Can I still pay with CPF?
Yes — you can continue using CPF for monthly repayments, just like before.
Are there any fees?
There are minor legal and valuation fees, but many banks offer subsidies that cover these costs fully or partially.
The Bottom Line
For decades, the 2.6% HDB loan represented stability and safety. But today, it represents missed opportunity.
In a world where bank mortgage rates are nearly 1% lower, staying put means you’re literally paying thousands more in unnecessary interest every year.
Don’t let your home loan quietly cost you more than it should. Cashew helps you compare rates from all major banks instantly and find the ideal loan for your situation — whether you’re refinancing or buying your first home.
💡 Check today’s best mortgage rates at Cashew.sg — it’s free, easy, and could save you thousands.
