How to Refinance Your HDB Loan in 2026

If you bought your HDB flat with an HDB concessionary loan, you have likely noticed something odd: the HDB loan rate has barely moved in years, sitting at 2.6 per cent, while bank home loan packages have been advertised at rates well below that. Naturally, the question comes up — should you refinance out of your HDB loan and into a bank loan?

HDB loan vs bank loan, in brief

The HDB concessionary loan is pegged at 0.1 percentage point above the CPF Ordinary Account interest rate, which is why it has remained fixed at 2.6 per cent for a long stretch even as bank rates moved with SORA. Bank loans, by contrast, are usually pegged to the 1-month or 3-month compounded SORA rate plus a spread, which means your rate moves with the market — for better or worse.

Bank loans typically also allow a higher loan-to-value ratio structure and often come with cash rebates, legal fee subsidies, or free conversion options that HDB loans do not offer. But they also expose you to rate volatility, and most come with a lock-in period of two to three years, during which early repayment can trigger a penalty.

The one-way rule you cannot undo

This is the single most important thing to understand before you refinance: once you switch from an HDB concessionary loan to a bank loan, HDB will not let you switch back. Even if bank rates rise well above 2.6 per cent in future years, you cannot return to the HDB loan for the same flat. This makes the decision permanent, so it is worth running the numbers carefully rather than jumping at a low headline rate.

Loan-to-value limits to know

For HDB flats, the loan-to-value limit for a bank loan is currently 75 per cent of the purchase price or valuation, whichever is lower (this was lowered from 80 per cent in August 2024). That means you will need to fund at least 25 per cent through a combination of CPF savings and cash, with a minimum of 5 per cent required in cash if you are taking the maximum loan quantum. Total Debt Servicing Ratio (TDSR) rules cap your total monthly debt obligations at 55 per cent of gross monthly income, and banks stress-test your affordability at a floor rate of 4 per cent regardless of the actual package rate offered.

Steps to refinance

1. Check your lock-in status. If you are already on a bank loan, check your current lock-in expiry date — refinancing during a lock-in period usually triggers a penalty of around 1.5 per cent of the outstanding loan amount.

2. Compare packages across banks. Look beyond the year-one rate — check the full rate schedule for years two, three, and the "thereafter" rate, since many packages step up significantly after the lock-in period ends.

3. Get an Approval-in-Principle (AIP). This gives you a firm sense of what a bank is willing to lend before you commit to switching.

4. Engage a lawyer. Refinancing requires a conveyancing lawyer to handle the discharge of your existing loan and the new mortgage. Many packages offer a legal fee subsidy to offset this cost.

5. Complete the switch. The process typically takes three to eight weeks from application to disbursement, depending on the bank and your paperwork.

Is it worth it?

Broadly, refinancing tends to make sense if the interest savings over the next few years clearly outweigh the legal fees, valuation fees, and any prepayment penalty you would incur — and if you are comfortable with a floating rate that can move with the market. It tends to make less sense if you are risk-averse, plan to sell the flat soon, or are only a year or two away from your Minimum Occupation Period ending and considering an upgrade.