Why a Longer Private or HDB Loan Tenure is the Wise Choice for Home Buyers - New Gen Home

Why a Longer Private or HDB Loan Tenure is the Wise Choice for Home Buyers

Should you take a home loan with a longer or shorter home tenure? In a high inflationary environment like Singapore, I would argue it is in your interest to choose a longer private or HDB loan tenure. Regardless if you are taking a private or HDB loan, I hope this post will shed some light on this topic and help make you make the right decision.
Table of Contents

Why talk about private or HDB loan tenure?

Home loan tenure is an important topic to discuss since it can have a significant impact on cash flow. Making the right decision about the loan tenure helps homeowners make effective and efficient use of their finances by allowing them to optimize their repayment structure. This becomes even more critical in a high inflationary environment such as Singapore, where it is imperative to take a long-term view when deciding on what is the right tenure and loan amount. Factors such as income, lifestyle and other financial commitments should be considered while making the decision, in order to ensure that the lender is well-prepared for any expenditure that may arise from taking up a home loan.

Regardless if you are buying a HDB flat or private property, I hope my post today will enable borrowers to make an informed decision about the right tenure for your individual situation.

What is loan tenure?

Before we begin, let me share some insights on loan tenure. It’s the length of time that you, as a borrower, have to fully repay your loan. The type of loan you have affects the loan tenure, with HDB housing loans usually having a 25-year tenure and other private properties a 30-year tenure.

Now, here’s the thing – the quicker you want to be debt-free, the shorter the loan tenure you’ll need to opt for. But, brace yourself for higher monthly payments. On the flip side, a longer loan tenure means you’ll be making smaller monthly payments, but over a longer period, leading to paying more interest in the long run.

Case study

Assuming you are looking to take up a home loan of $1,000,000 (no downpayment) and you have the option to choose between 15 years and 30 years loan tenure at an annual interest rate of 3.5%.

Here are the main cost differences. 

15 years loan tenure

15 years loan tenure
15 years loan tenure Amortization Table

30 years loan tenure

A 30-year loan tenure might give you more time to pay off the principal, but it’ll end up costing you more in interest. On the other hand, a 15-year mortgage will have higher monthly payments, but you’ll save a lot in the long run. And don’t forget that different loan terms can give you more flexibility in terms of down payments and debt-to-income ratios.

The above scenario is to give you an idea on how much your monthly repayment can vary with different loan tenure. The concept above is applicable to both hdb loans and bank loans. 

Do bear in mind the difference is the maximum loan tenure for HDB is 25 years and interest rates for HDB loan is fixed at 2.6 %. 

So, now that you understand how the loan term affects your mortgage payments and overall financial situation, I am going to give you 5 main reasons why it is a better idea to opt for a longer loan tenure especially in Singapore.

Reasons 1: Lower monthly loan repayments amounts

Choosing a longer loan tenure is considered a more financially prudent move in Singapore because it can help you to keep your monthly mortgage payments more affordable, which can make it easier for you to budget for other expenses and to manage your overall debt. When you choose a longer loan tenure, the amount of money you need to pay each month is spread out over a longer period of time, which can make it more manageable for you to make those payments. This can be especially important for borrowers who may have a lower gross monthly income or who may be burdened by other debt obligations.

Reason 2: Lower Risk of Defaulting on Loan

Choosing a longer loan tenure can help minimize the risk of default because it reduces the monthly mortgage payments. With a longer loan tenure, the total amount of the loan is spread out over a longer period of time, resulting in smaller monthly payments. This can make it easier for the borrower to afford the mortgage payments and stay current on the loan. Additionally, a longer loan tenure allows more flexibility in case of any financial difficulties that may arise, such as job loss or unexpected expenses.

Reason 3: Resilient against life unexpected expense

You know what they say, “Expect the unexpected.” And when it comes to life, unexpected expenses can pop up at any time, whether it’s a broken down car or your friend’s surprise wedding. But, having a longer loan tenure with lower monthly repayments can be a lifesaver in those moments. Sure, you may end up paying a bit more in interest in the long run, but it’s worth it for the peace of mind knowing that you have a bit of extra cash on hand in case of emergencies. Plus, it’s like having your own personal rainy day fund, without having to skimp on your kopi siew dai cravings. As long as you stay on top of your payments and use this credit responsibly, having that extra flexibility can be a real game-changer.

Reason 4: Prioritize other investments

When it comes to your finances, it’s important to think long-term and plan for the future. One way to do this is by prioritizing other investments, like stocks, bonds or other passively managed investment funds. Not only do they offer long-term growth potential and income through dividends, but they can also help create wealth for yourself and your family. By using your CPF Ordinary Account to repay your mortgage, you can free up more cash on hand to invest in these areas. Just make sure to do your research and find the investments that suit you best. And remember, investing is like playing a game of chess, you gotta think a few moves ahead.

Reason 5: High inflationary environment

In a high inflationary environment, the value of money decreases over time. Therefore, if a loan has a longer tenure, the borrower will have to pay back the loan over a longer period of time, during which the value of the money they are repaying will have decreased. This means that the real value of the loan will be less for the borrower, making it more affordable for them to repay. Additionally, with a longer loan tenure, the monthly payments will be lower, which can also make the loan more affordable for the borrower.

Frequently Asked Questions (FAQ)

Switching from an HDB loan to a bank loan is an option that should be considered for those looking for more flexibility and access to a higher loan amount. To find out your maximum loan amount when switching, you would need to get in touch with a bank who will assess your financial position and credit score. Be aware that when switching you may have to give up the 2.6% interest rate currently offered by HDB, so make sure that the costs involved are worth it before deciding on the switch. 

Furthermore, look at features offered by different banks such as additional benefits or lower processing fees and choose one that best suits your needs.

  1. Interest rate: Compare the interest rates of your current HDB loan and the loan offered by the bank. One of the biggest trade-offs for buyers switching from HDB loan to bank loan is the stability of the interest rates offered by HDB. HDB interest rates is fixed and considered one of the most stable in the market right now at 2.6%.
  2. Repayment tenure: The length of time over which you will repay the loan. Consider if the new repayment tenure fits your financial situation.
  3. Processing fees: Refinancing may involve paying processing fees, so consider the cost of these fees in relation to the savings you will make from refinancing.
  4. Eligibility criteria: Check if you meet the eligibility criteria for refinancing, such as having a good credit score and fulfilling 55% TDSR (Total Debt Servicing Ratio) and 30% MSR (Mortgage Servicing Ratio).
  5. Flexibility: Consider the flexibility of the loan terms and conditions, such as the ability to make early repayments or the availability of loan refinancing in the future.
  6. Legal and financial implications: Refinancing may have legal and financial implications, such as early repayment fees, so be aware of these before making a decision. Currently loans prescribed by HDB do not incur early repayment penalty.
  7. Overall financial impact: Consider the overall financial impact of refinancing, including any costs, savings, and long-term financial goals.

Well, if you’re tired of paying your HDB loan for what feels like an eternity, you’re in luck! You can speed up the repayment process by making early or extra payments. That way, you’ll pay less interest in the long run and be debt-free sooner. But before you start throwing money at your loan, double check if there are any early repayment fees – you don’t want to pay extra just to pay off your loan faster! If you’re not sure how to go about shortening your loan tenure, a friendly financial advisor or a representative from HDB would be happy to help. At the time of writing this post, loan prescribed by HDB do not incur early repayment penalty. 

The maximum loan tenure for an HDB resale flat in Singapore is 25 years, as regulated by the Monetary Authority of Singapore (MAS)


Understanding the housing loan tenure is a crucial step in the process of buying a home in Singapore. It’s important to weigh the pros and cons of a longer loan tenure with lower monthly repayments, even though it comes with higher interest expenses.

Even just understanding the differences between HDB loans and private home loans, including interest rate, loan-to-value ratio, repayment tenure, and mortgage servicing ratio, can help you make an informed decision.

It’s also important to consider your own financial situation and goals, and how the loan will fit into your lifestyle. Remember, it’s all about finding a balance that works for you and your finances. Take your time, do your research and make a decision that you’ll be comfortable with for years to come.

As a realtor working in a continuously changing economic landscape, it is increasingly important to advise my clients beyond transactions. Every client’s financial situation is unique, there is no one size fits all solution for every case. As a realtor myself, my job goes beyond transactions, it is important to go beyond my duties and assist my clients to seek the best outcome possible beyond property-related matters.

Need a review on your property investment plans, best buys available or assistance in the marketing of your properties?

Get a 1-time free 30 min consultation

  • An in-depth financial affordability assessment and timeline planning
  • Highly relevant investment insights
  • A clear and customised investment road map
  • A curated list of best buys in today’s market with good growth potential & minimal risks
  • Selecting units with the highest potential in a new launch project
  • Advice on marketing and getting a buyer for your property fast
  • Find out more about me here

Recommended for you

Selling after MOP?

Many who are contemplating selling their HDB flat after 5 years are not aware of the financial considerations that need to be addressed. Here in

Add a public comment...

I'm here to assist you

Something isn’t clear?

Feel free to contact me, and I will be more than happy to assist with your real estate needs.