The following never exits the loop:

until test -f "~/file.txt"; do sleep 1 && echo sleep; done; echo done

The following does:

until test -f "/cygdrive/d/cygwin-home/file.txt"; do sleep 1 && echo sleep; done; echo done

HOME is set and confirmed:
echo $HOME
/cygdrive/d/cygwin-home

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