Applying for a home loan involves many decisions, including choosing the right loan tenure for yourself. In Singapore, the maximum allowable loan tenure depends on the type of property you intend to purchase. According to the Monetary Authority of Singapore (MAS), the maximum loan tenure for HDB flats is 30 years, while for private properties, it is 35 years.
However, in practice, the realistic loan tenure may be shorter. For example, if you are buying an HDB flat and take an HDB loan, your loan tenure is capped at 25 years.
In this guide, we will explain everything you need to know about loan tenure and how it affects the amount you need to pay for your housing loan.
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What is Loan Tenure?
From the word “tenure” itself (the term for holding or possessing something), loan tenure refers to the period or pre-arranged timeframe for a borrower to fully repay the principal and interest to the lender. For example, a 25-year loan tenure means you agree to fully repay the loan (including interest) within 25 years.
Some borrowers decide on their loan tenure after seeing the interest rates of their chosen bank, or after using tools like a mortgage calculator to figure out the required monthly repayments for various loan tenures.
During the financing process, the easiest approach might be to keep the original loan tenure unchanged. After this, you can still apply to change your loan tenure, but it requires the bank’s approval.
The lender may require you to go through another round of credit assessment and approval to determine if they should allow you to change the loan tenure. If you plan to shorten your loan tenure, you should be aware that the bank might charge some fees to compensate for the interest they will forego after approval.
How Loan Tenure Affects Your Mortgage
In Singapore, if you choose a loan tenure that extends beyond the age of 65, your Loan-to-Value (LTV) ratio will be reduced. For bank loans, you can typically obtain an LTV of up to 75%, but if your loan tenure is too long relative to your age, it can drop to as low as 55%.
For instance, if you apply for a 30-year loan at age 40 (meaning your loan will be paid off at age 70), the bank can only offer you a maximum loan of 55%, which could directly impact your ability to afford the property you plan to buy. Conversely, if you apply for a 20-year loan (assuming all other conditions are met), you could borrow up to 75% of the property price.
Singapore Home Loan Limits and Down Payment Ratios
| Home Loan Limit | Minimum Cash Down Payment | |
| First Home Loan | 75% | 5% |
| Second Home Loan | 45% | 25% |
| Third Home Loan | 35% | 25% |
*Source: Monetary Authority of Singapore (MAS)
If the loan tenure exceeds 30 years, or if the applicant is over 65 years old at the end of the loan, the loan limits and down payment ratios will be as follows;
| Home Loan Limit | Minimum Cash Down Payment | |
| First Home Loan | 55% | 10% |
| Second Home Loan | 25% | 25% |
| Third Home Loan | 15% | 25% |
*Source: Monetary Authority of Singapore
The solution to this problem is, of course, to apply for a shorter loan tenure, but this also has its limits, as the loan tenure also affects your Total Debt Servicing Ratio (TDSR)—which impacts your eligibility for any housing loan, and the Mortgage Servicing Ratio (MSR)—if you are buying an HDB flat.
To qualify for a home loan, your monthly Total Debt Servicing Ratio (TDSR) cannot exceed 55% of your monthly income. If you are buying an HDB flat, there is an additional Mortgage Servicing Ratio (MSR) requirement that your housing loan cannot exceed 30% of your monthly income. A shorter loan tenure means higher monthly repayments, which, depending on your financial situation, may exceed your TDSR and/or MSR. Therefore, the loan tenure you choose to apply for can also affect your financial eligibility for the loan.
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When is a Longer Loan Tenure Better?
It’s better to opt for a longer loan tenure if the following situations apply:
1. You need to ensure good cash flow
A good way to better manage your monthly cash flow is to keep your monthly repayments within 30% of your monthly income. Although the Mortgage Servicing Ratio (MSR) only applies to HDB purchases, it is a good general guideline. If your repayments exceed this amount, choose a longer loan tenure to lower your monthly payments and set aside more cash for emergencies and other necessities.
A longer loan tenure can also help you maintain a positive cash flow for your investment property. If you hope to earn income from your property, you need to keep your property’s cash flow positive, meaning you earn more than the cost of holding the property. For example, if you earn S$50,000 in rent annually and your total expenses on the property (including mortgage, property tax, maintenance, etc.) are only S$40,000 per year, your property is considered cash-flow positive.
The best strategy to maintain a positive cash flow for your property is to keep installment payments and maintenance costs low. If this is your goal, a longer loan tenure is more ideal as it equates to lower monthly repayments.
2. You want to reduce your Total Debt Servicing Ratio
The Total Debt Servicing Ratio (TDSR) is the percentage cap on income that can go towards servicing loans, set by the Monetary Authority of Singapore (MAS) to prevent borrowers from becoming over-leveraged. The current threshold for housing loans is that the TDSR cannot exceed 55% of the borrower’s monthly income.
If you need more funds to invest in another property or have plans for your next major purchase, choosing a longer loan tenure would be more strategic, as it can help lower your monthly repayments and keep your TDSR at an appropriate level for your next loan application.
3. You want a longer loan tenure so you can shorten it if needed
Although a longer loan tenure means you might end up paying more interest, it gives you more options. If you already have enough money to cover higher monthly repayments, or if you decide to pay off your housing loan in full before the original term ends (which, of course, may incur some fees), this choice provides you with the flexibility to shorten the loan tenure. This might also be a more ideal option if you want to refinance your mortgage in the future.
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When is a Shorter Loan Tenure Better?
Conversely, a shorter loan tenure may be more beneficial for you if the following situations apply:
1. You want to lower your total interest cost
As mentioned above, a longer loan tenure usually means you’ll spend more on interest over the life of the loan. If you want to keep the interest on your monthly payments as low as possible, choose a shorter loan tenure. Even so, another option to reduce interest costs is to choose a longer loan tenure initially and then pay off your loan a few years early (if you can afford it).
2. You can afford higher monthly payments
If your income allows you to make higher monthly payments without feeling deprived or at risk of late payments, then choosing a shorter loan tenure might be more practical. Besides reducing the amount of interest you have to pay, this can also help you avoid potential costs associated with long-term debt (e.g., refinancing processing fees, lump-sum early repayment fees, etc.).
3. You want to get better rental/investment returns
Although you will be paying higher monthly installments, a shorter loan tenure could also bring you better investment returns in the long run, considering the amount you can save on interest and other potential fees.
Furthermore, since you can pay off your debt faster, all the money you get from rent will go directly towards your passive income and property maintenance costs, so it is highly likely that you will see a return on your investment sooner.
When to Change Your Loan Tenure?
Both longer and shorter loan tenures have their advantages, but it all ultimately depends on which option is best for you based on your financial capacity and future goals.
Just know that if your priorities change (e.g., you want to invest in a new property or start a business), or your financial situation improves (but is still not enough to pay off the loan in one lump sum), you can change your loan tenure (e.g., shortening a 30-year loan tenure by half).
Refinancing is a good way to adjust your loan tenure according to your current financial situation.
The lock-in period for a home loan is typically two to five years. If your income increases after a few years, you might be able to afford higher monthly payments and pay off your mortgage faster. In this case, if you want to clear your debt more quickly, it’s time to refinance for a shorter term once the lock-in period (and clawback period) is over. If you need a longer loan tenure to get lower monthly payments and ease cash flow, you can also refinance or reprice.
Is it difficult to decide which loan tenure to choose? Do you want to know when is the right time to change your loan tenure or refinance? Anjia SG can help you—contact us to get started!
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FAQs About Home Loans and Loan Tenure
• What is a loan tenure?
Your home loan or mortgage tenure is essentially the agreed-upon length of time to repay your debt (principal plus interest).
• What is the maximum tenure for a home loan?
According to MAS regulations, the maximum home loan tenure for HDB flats is 30 years and for private properties is 35 years.
• What is the minimum loan tenure?
The MAS does not stipulate a minimum repayment period for housing loans. It’s best to discuss this directly with your lender.
• How can I increase my loan tenure?
Refinancing is a good way to adjust your loan tenure. Alternatively, you can discuss your options directly with your bank.
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