Which Home Loan Tenure Is Best For You? Short vs Long Home Loan Tenure

By Amanda Goh Which Home Loan Tenure Is Best For You? Short vs Long Home Loan Tenure |Published 02 Oct 2021 3 minutes

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At a glance...

For many, taking a housing or mortgage loan would be one of the largest loans we would need to take in our lives. There are various loans you can consider taking in Singapore, including a HDB loan, bank loan, and floating rate bank loan.

If you are considering taking a loan for your house, read on to find out which loan will be suitable for you.

Pros and cons of a long home loan

Taking up a home loan with a long tenure allows you to receive better cash flow. As monthly repayments increase exponentially as your loan tenure reduces, you will be able to receive more money for your daily needs when taking a longer tenure than a shorter one.

Longer home loans are flexible — if you are earning more, you will be able to make early repayments, thus saving on interest. However, you will have to ensure that your HDB home loan does not have early payment penalties.

Longer loan tenures also mean that you will have lesser monthly mortgage loan repayments. This is as your home loan will not take up as much TDSR limit as compared to a short tenure.

On the other hand, taking up a longer tenure will result in you paying more in interest over time.

Loan Amount 418,000.00
Loan Repayment Period (in years) 25 15
Estimated Monthly Instalment $1,897 $2,807
Total Interest ($) $150,902 $87,242
Total Payment ($)
(Loan Amount + Total Interest)
$568,902 $475,142
% of Total Payment Spent on Interest 27% 17%

Looking at the table, you will need to pay an additional $93,760.00 in interest if you take a longer home loan.

Pros and cons of a shorter home loan

Alternatively you can consider getting a shorter home loan tenure.

There are a few general guidelines you will need to know about before getting a shorter loan tenure:
  • Your monthly repayments must be below your TDSR/MSR
  • You should be earning enough to build ample savings
  • You will need to have enough in your CPF Ordinary Account to repay your loans

As seen in Table 1, a shorter home loan will allow you to pay less interest over time. Furthermore, paying your home loan faster gives you a peace of mind, relieving yourself of the financial burden.

However, while you will have the benefit of paying less interest over time, a shorter home loan would mean that you may need to make higher monthly payments. This means having less flexibility and freedom to make these instalments each month.

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Important Information

Do note that the Monetary Authority of Singapore (MAS), has a cap on the maximum loan tenure for housing loans. This cap is as follows:

  • 30 years for HDB flats
  • 35 years for non-HDB properties

However, if you are taking a HDB loan for an HDB flat, the cap for loan tenure is at 25 years.

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