Should I go for max HDB loan tenure?

First question to answer: Permanent home? Or will you move?

After you have considered that carefully, you can move on to decide whether you want to max the tenure loan.

For a large majority of people at today’s juncture, the regulatory measures have removed much of the lottery effect from purchase of a HDB home in Singapore. As such, the best recommendation I would usually give to young couples is to purchase the best home they love at a price they can afford.

Whether or not the interest affects you is relatively non-important if you decide to not sell because the 2.6% interest will only amount to an extra $2,000 after 25 years per $100,000 loan from the increment of 0.1% of the standard 2.5% from your OA. And whether you need to return the monies to OA will only apply when you SELL. If you hold on to it indefinitely, you do not need to worry about the interest owed. A better way to get a return would be to rent it out during retirement instead of depending on capital gains which might not come from the many numerous cases I have done for my clients. Lastly, a HDB loan unlike bank loans, does not have an early payment penalty should you decide to pay in full 10 years early.

The shorter term will mean you pay more principal in the beginning but you give up your ability to share the risk with HDB for asset valuation over 25 years.

Given my experience with hundreds of families, I would personally take the longest term available as I do not view the HDB as an asset. Most people do not profit from it over the long term after adding in the frictional costs. View your HDB as a home, not an investment.

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I like Zhe Liang's answer this time, because the examples show you the cumulative interest paid over the long term. It is usually a lot of money, and that makes your HDB more expensive than it looks right now.

Just to give a different perspective for you to think about...When you pay your housing loan with cpf, you are actually paying interest twice, once for the loan (2.6% for hdb), and once for your cpf interest forgone (2.5%), for a total of 5.1% per year (not mathematically correct, but its the principle).

Not many people can consistently invest and get better returns of more than 5% per year for 25 years.