Many buyers in Singapore are surprised when they realise that the home loan amount they qualify for when purchasing an Executive Condominium (EC) or HDB flat is noticeably lower than what they could obtain for a private property. This often leads to confusion, especially when income level, age, and overall financial position remain unchanged.

In reality, this difference is not arbitrary. It is the result of regulatory frameworks, affordability controls, and bank assessment rules that apply differently to public housing and private property. Understanding these differences is essential for buyers planning their budget, upgrade path, or long-term property strategy.

Different Housing Types Are Governed by Different Rules

HDB flats and Executive Condominiums are classified as public housing, even though ECs resemble private condominiums in design and facilities. During the Minimum Occupation Period, ECs are treated the same as HDB flats for financing purposes.

Public housing is subsidised and intended for owner-occupation. As such, it is subject to stricter affordability controls to prevent over-leveraging and to ensure long-term housing sustainability.

Private properties are not subject to these same public-housing affordability restrictions. While still regulated, banks are given greater flexibility in assessing and structuring loans.

Mortgage Servicing Ratio (MSR) Is the Key Limiting Factor

The most important reason EC and HDB loans are lower is the Mortgage Servicing Ratio (MSR).

For HDB flats and ECs, MSR caps the housing loan instalment at 30 percent of gross monthly income. This cap applies regardless of how high a borrower’s income is and regardless of whether the borrower has other debts.

Private properties are not subject to MSR.

How This Works in Real Life (Income Example)

Consider a buyer earning a gross monthly income of $10,000.

For an HDB flat or EC, MSR limits the maximum housing loan instalment to 30 percent of income, which is $3,000 per month. Even if the buyer has no other debts, the bank cannot assess the housing loan beyond this $3,000 threshold. This directly limits the loan quantum the buyer can obtain.

Now consider the same buyer purchasing a private property. MSR does not apply. Instead, the loan is assessed under the Total Debt Servicing Ratio (TDSR), which allows total monthly debt obligations of up to 55 percent of income, or $5,500 per month.

If this buyer has no other debts, the full $5,500 can be allocated to the housing loan, almost double what is allowed under MSR.

Impact of Existing Debts (Car Loan Example)

The difference becomes even clearer when existing debts are involved.

Using the same $10,000 income example, assume the buyer has a car loan of $2,000 per month.

For an HDB or EC, MSR still caps the housing loan instalment at $3,000 per month, regardless of the car loan. The car loan does not reduce the MSR cap, but the buyer must still satisfy TDSR overall. In practice, many buyers hit the MSR ceiling long before TDSR becomes the limiting factor.

For a private property, TDSR applies directly. From the $5,500 total allowable debt, the $2,000 car loan is deducted first. This leaves $3,500 per month available for housing loan repayment, still higher than the $3,000 MSR cap for HDB or EC purchases.

This explains why buyers with the same income and debt profile often qualify for a higher loan amount for private property, even when carrying existing liabilities.

TDSR Applies to All Properties, but MSR Comes First for Public Housing

While both public and private property loans are subject to TDSR, MSR applies first for HDB and EC purchases. Many buyers reach the MSR ceiling before fully utilising their allowable debt capacity under TDSR.

For private properties, only TDSR applies, allowing borrowers to allocate a greater portion of income toward housing repayment.

Stress-Tested Interest Rates Further Reduce Public Housing Loans

Banks do not assess loans using promotional interest rates. Instead, they apply stress-tested interest rates to ensure borrowers can cope with future rate increases.

For public housing loans, banks often apply more conservative stress rates, reinforcing affordability limits. This further reduces the maximum loan amount that can be approved for HDB flats and ECs.

Private property loans may still be stress-tested, but banks have greater discretion in structuring these assessments.

Loan-to-Value Is Not the Main Constraint

Many buyers assume Loan-to-Value limits are the primary reason for lower EC or HDB loans. In reality, LTV limits are often similar for first-time borrowers across property types.

The real constraint is income-based servicing rules, not property value.

ECs Remain Public Housing During MOP

Although ECs look and feel like private condominiums, they are treated as public housing during the Minimum Occupation Period. This means MSR and public-housing rules continue to apply for financing.

Only after full privatisation do some restrictions ease, particularly in resale transactions.

Why Private Property Loans Feel “Easier”

Private property loans feel more generous because banks have greater flexibility under TDSR. For borrowers with stable income and manageable liabilities, this flexibility translates into higher approved loan amounts and better optimisation of debt usage.

This does not mean private property loans are risk-free. It reflects a different regulatory intent.

Common Misunderstandings Buyers Have

A frequent misconception is that banks are inconsistent or unfair. In reality, they are applying different regulatory frameworks.

Another misconception is that higher income will automatically raise EC or HDB loan amounts. While income helps, MSR still caps affordability, limiting how much income can be translated into borrowing power.

How Buyers Can Plan More Effectively

Understanding these rules allows buyers to plan realistically. For HDB and EC buyers, managing expectations around loan quantum is crucial. Reducing other liabilities, clarifying income structure, or adjusting purchase price expectations can help.

For buyers planning to upgrade to private property, understanding how loan assessment changes enables better long-term planning.

Importance of Pre-Assessment Before Committing

Many buyers only discover these differences after paying option fees. A proper pre-assessment, including an In-Principle Approval, helps buyers understand their true borrowing capacity across property types before committing.

Conclusion

EC and HDB loan amounts are generally lower than private property loans because public housing is governed by stricter affordability controls, particularly the Mortgage Servicing Ratio and conservative stress testing. These measures are designed to promote sustainable home ownership rather than maximise borrowing.

Private properties are assessed under a more flexible framework using TDSR alone, allowing higher loan amounts for the same income profile. Understanding these differences helps buyers plan confidently and avoid unpleasant surprises.

Before committing to any property purchase, it is always advisable to assess your borrowing capacity across different property types. At Fairloan Mortgage Advisory, we help buyers understand these distinctions clearly, structure their loans correctly, and plan their property journey with confidence.

Last but not least, always check out the latest rate offered by the banks