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A home loan tenure indicates the timeline during which you must repay your home loan. The tenure can range up to 30 years.
Typically, a home loan’s minimum tenure is about 5 years, while the maximum tenure can extend up to 30 years. Remember a home loan’s maximum tenure is based on your retirement age. The home loan repayment tenure is influenced by various factors, some of which include the age, principal amount, interest rate, and monthly income.
Here are the key differentiating points between a long-term home loan repayment tenure and a short-term home loan repayment tenure.
Differentiating Points |
Long-term Loan Tenures |
Short-term Loan Tenures |
|---|---|---|
Tenure |
Long-term loan repayment tenures are usually above 5 years. The maximum repayment tenure can extend to 30 years |
Short-term loan repayment tenures are usually under 5 years |
Mortgage Period |
Your house will be mortgaged for an extended duration as the ownership of the property will not be transferred to your name until the loan amount is completely repaid |
Your house will be mortgaged for a shorter duration |
Interest Rate |
Lenders typically charge reduced interest rates since long-term home loans are spaced out over several years |
To compensate for the smaller loan period, lenders charge a higher rate of interest |
EMI Amount |
The EMI payments may be comparatively lower due to the extended repayment tenure. However, the overall interest outgo can be higher |
As short-term home loans are managed across a shorter time frame, the EMI amount tends to be higher. However, the total interest outgo will be lower. |
Disbursement Time |
Lenders take more time to disburse the amount as the principal amount of long-term home loans is generally very high. They use this time to evaluate the borrower’s creditworthiness and repayment capability. |
A short-term home loan can be disbursed quickly, as the amount is generally lower and involves minimal paperwork. |
Short and long tenures have their own set of benefits. You should pick one based on your principal amount, interest rate, and monthly repayment capacity.
Here are some benefits of a short-term home loan tenure:
Enhanced flexibility to choose the loan duration and repayment schedule
Reduced overall borrowing costs due to lesser interest outgo
Higher potential for savings, if you prepay the loan during the early parts of the tenure
Here are some advantages you get when you choose a long-term home loan tenure:
Lower interest rates and monthly EMIs due to extended home loan tenure
Greater tax benefits under Section 24 of the IT Act on the interest paid towards your home loan
Improved Credit Score due to consistent EMI payments throughout the home loan tenure
Some of the factors you must consider while choosing an ideal repayment tenure are as follows:
Your age is a crucial factor when choosing a home loan tenure. You may opt for a longer tenure if you are young since you have more working years ahead. On the other hand, you may consider a shorter tenure if you want to clear your dues before retirement.
The loan amount you borrow does influence your repayment window. If you opt for a higher loan amount, you may need a longer tenure to pay your EMIs comfortably. Conversely, choosing a shorter tenure is ideal if you have opted for a lower loan amount.
If you have opted for a long-term loan, lenders might charge a lower interest rate since your loan is spaced out over a longer period. On the other hand, lenders charge a higher rate to compensate for the shorter period and the reduced interest earned.
Different types of home loans have varied impacts on your interest rates and monthly instalments. Hence, you must consider the type of home loan and then choose the right home loan tenure. This also affects how you structure the repayment of the loan.
Your monthly income plays an important role in determining your repayment capacity. In case you have a higher income, you can choose a shorter tenure as you can manage higher monthly instalments. On the contrary, with a lower income, choosing a longer tenure is better as it reduces the risk of default.
Another factor you must consider when choosing a loan tenure is the reason for taking the loan. For example, the tenure you choose for a home that will serve as your primary residence will differ from a property you purchase as an investment.
Here are some tips to help you choose the best home loan tenure for smooth loan repayment.
Assessing your financial situation is essential while choosing a home loan tenure. If your finances aren’t stable, you risk defaulting on your payments and incurring hefty penalties.
Check your credit score and report since they can influence the loan terms that you can get. With a good credit score, you can negotiate with the lender for a shorter or longer tenure, as per your preference.
Choosing a realistic loan amount is essential since they influence the tenure of your loan.
You must keep your long-term goals in mind when deciding on the loan tenure. Aligning the loan tenure with your life goals is essential to handling repayment smoothly.
Choosing the right tenure for your house loan is crucial, as it can help you save a lot of money in one way or the other. To see which tenure would be right, you can use the home loan EMI calculator on Bajaj Markets.
Refer below the table
Home Loan Providers |
Maximum Loan Tenure |
|---|---|
40 Years |
|
20 Years |
|
30 Years |
|
20 Years |
|
20 Years |
|
30 Years |
|
30 Years |
|
25 years |
|
25 Years |
Disclaimer: The tenure options can vary at the discretion of the lending institution. Kindly check with the lender before applying for a home loan.
You can choose a maximum home loan tenure of up to 30 years.
Yes, most lenders offer you the option of changing your home loan tenure based on your financial situation and creditworthiness. You must contact your lender and request to change the tenure.
Yes, most home loan lenders allow you to prepay your loan before the original tenure. However, you may need to pay foreclosure or prepayment charges. If you choose to repay your loan earlier, you can save on interest and lower your tenure.
You may get lower interest rates if you choose to take a home loan with a longer tenure. Additionally, another advantage is that your EMI amount is lower as well.
