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Home Loan Tenure

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What is a Home Loan Tenure?

A home loan tenure is the time frame you will have to repay your home loan. Home loan repayment tenures can be as high as 30 years. The maximum home loan repayment tenure one can avail, however, will depend on their retirement age.

What is the Ideal Home Loan Tenure?

The ideal tenure for home loan repayment depends upon multiple factors such as the principal amount, rate of interest, and the monthly income of the borrower. Usually, the minimum tenure for home loan is 2 years, while the maximum tenure can go up to as much as 30 years.

Long Term vs Short Term Home Loan Tenure

The key differentiating points between a long home loan repayment tenure and a short home loan repayment tenure are as follows:

Differentiating points

Long-term loan tenures

Short-term loan tenures

Tenure

Long-term loan repayment tenures are usually above 5 years. The maximum tenure can be as high as 30 years.

Short-term loan repayment tenures are usually under 5 years.

Mortgage period

Your house will be mortgaged for a longer period of time as the ownership of the property will not be transferred in your name until the loan amount is completely repaid.

Your house will be mortgaged for a shorter time duration in the case of short term loan repayment tenures.

Rate of Interest

Lenders charge lower interest rates as long term loans are usually spaced out over decades.

To compensate for the smaller loan period, lenders charge a higher rate of interest on short-term loans.

EMI Amount

The EMI payments will be on the lower side as the repayment tenure is long. The total money spent on interest, however, will be high due to the longer time frame.

As short-term loans are spaced out over a smaller time period, the EMI amount is typically on the higher side. But, the total interest amount that you will pay will be lower.

Disbursement speed

Lenders take more time to disburse the amount as the principal amount of long-term home loans are generally very high. They use this time to evaluate the creditworthiness and the repayment capability of the borrower.

A short-term loan is disbursed swiftly in comparison as the amount is generally smaller and minimal documentation is involved.

Long term vs Short term Tenure: Which one is Better

Your home loan tenure can either be short term or long term. You should pick one on the basis of your principal amount, interest rate, and overall monthly repayment capacity. Short and long tenures have their own set of benefits, which are as follows:

  • If you go for a longer loan repayment tenure, you will have to pay lower amounts as EMI monthly, but the overall interest you will pay over time will be much more

  • If you go for a shorter loan tenure, you will pay higher EMIs every month, but you will pay a significantly lower amount as interest over the loan term

How to Choose the Best Home Loan Repayment Tenure

When you choose a short home loan tenure, you will be able to clear the loan in a short span of time and save up on the interest payable. If you go for a long loan repayment tenure, your overall monthly EMI outflow will reduce, but you will pay a significantly larger amount as interest over time. So, keeping the pros and cons of long and short repayment tenures in mind, you should go with the loan repayment tenure which will suit you best.

If you want to know the total interest outflow that you will have in either of those cases, you can use the Home Loan EMI calculator available on Bajaj MARKETS. This algorithm-based tool simply asks you for the principal amount, preferred tenure, and expected interest rate. Once you have fed in these details, you will be able to see your monthly EMI outflow as well as the total amount you will pay over the course of the home loan tenure.

Factors to Consider Before Choosing a Home Loan Tenure

Some of the factors that must take into consideration while choosing a repayment tenure that is ideal for you are as follows:

  • Age (helps calculate your remaining earning years)

  • Required home loan amount

  • Interest rate

  • Home loan type

  • Monthly income

  • Budget

  • Purpose behind taking up a home loan (whether purchasing a commercial or residential property, constructing a property, renovating a property, or enhancing a property)

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 house loan tenure would be right for you, you can use the home loan EMI calculator on Bajaj MARKETS and see what your home loan equated monthly instalments (EMIs) would look like at different tenures.