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What Housing Loan Tenure Should You Choose When Buying Your First Home?


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Adulting just got real the moment you apply for your first home loan.

It can be quite overwhelming to learn all the mortgage jargon, housing loan conditions, and legal requirements. One common scenario is that you may think you are paying less, but the fact is, it’s mostly interest.

Let’s dive into one factor that helps you save on interest rates when taking a housing loan.

What Is Loan Tenure?

Loan Tenure is the maximum loan repayment period of your loan.

The maximum loan tenure of HDB and bank loans are different:

  • HDB loans – 65 years minus buyer’s age or 30 years, whichever is shorter
  • Loans through financial institutions (FI) – 35 years

The younger you are, the longer your possible maximum loan tenure.

A longer loan tenure may mean smaller repayment amounts, but it also results in having to sustain the monthly instalments as you grow older. Plus, you end up paying more interest over time.

Be aware that the maximum loan amount could be reduced to 55% of the property purchase price if your loan tenure exceeds:
25 years for an HDB flat
30 years for private property

Does the Loan Tenure Affect the Loan Amount?

The maximum housing loan you can take depends on your age, loan duration, property type, and whether you have existing housing loans. For joint borrowers, they are assessed using an
income-weighted average age. Note that the HDB has capped loans based on the TDSR to encourage flat buyers to exercise prudent financial planning.


Is a Shorter Loan Tenure Better?

Yes. While shortening the loan tenure increases the monthly mortgage instalment, you will save on interest.

Let’s look at the scenarios when you borrow $250,000 with different loan tenures at the current HDB housing loan concessionary interest rate of 2.60%.

Loan Tenure of 20 Years

  • Monthly payment – $1,337
  • Total payment over 25 years – $320,880
  • Total amount of interest paid – $70,880

Loan Tenure of 25 Years

  • Monthly payment – $1,135
  • Total payment over 25 years – $340,500
  • Total amount of interest paid – $90,500

The interest savings that you get with a shorter loan tenure is $19,620.

As the famous saying goes, you reap what you sow. Shorter loan tenure may mean bigger repayment amounts, but rest assured that you’ll enjoy more years without having to think about monthly instalments. The best part? You get thousands of savings in your pocket.

Ready to start your home ownership journey? You may download Ohmyhome from the Play Store or App Store for handy guides on buying your home without an agent. Use the loan calculators at your convenience or talk to our in-house mortgage specialists for expert loan advice.

Call 6886 9009 to learn more now.

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