A home loan is a financial tool that allows individuals to purchase a home without having to pay the full cost upfront. In India, home loans are offered by several banks and financial institutions, and the maximum tenure for a home loan varies from lender to lender.Â
The maximum tenure for a home loan is the period of time for which a borrower can avail of a home loan and repay it to the bank. Typically, home loan tenures in India range from a year to 30 years, depending on the lending institution’s policies, the borrower’s eligibility, and the loan amount. The tenure for a home loan in India can have a significant impact on the monthly Equated Monthly Instalment (EMIs) amount and the overall cost of the loan.
What is the maximum tenure available for a home loan?
Financial institutions and banks offer tenure of up to 30 years for a home loan. Since the length of your home loan significantly affects your EMI amount and other costs, opt for a solution that suits your capacity.
Is a longer home loan tenure a bad option?
Having a longer tenure reduces the monthly EMI amount, which is an advantage, but it may have long-term implications. As already discussed, longer tenure raises borrowing costs. Simply put, a 30 year home loan costs more in the form of interest payment than one taken out for 20 years.Â
An extended housing loan tenure may get in the way of your long-term financial objectives. It is advisable to choose a loan tenure that does not affect your other goals. It will help you to focus on other plans like making investments and carrying out other significant purchases.Â
How to determine the optimum home loan tenure?
Although the perfect tenure may vary depending on various factors, always remember to abide by the basic rules for a shorter home loan tenure that fits into your budget. The EMI for a home loan should be less than 50% of your monthly income.Â
To prepay the loan amount, you can use any other resources you get, such as annual bonuses or investment maturity funds. It will allow you to get debt-free as soon as possible.
You can then choose the suitable home loan tenure based on your home loan requirements and the interest rate charged. To avoid getting into financial trouble, you must not try to reduce the length of the loan in a way where it exceeds your repaying capacity.Â
An easier way to decide on an appropriate home loan tenure is to use a home loan EMI calculator and get an idea of what you need to pay in the form of EMIs depending on varied tenures, the interest rate charged and the loan amount. With this online tool, you will be able to see how changing tenure can impact your loan repayment EMIs.
Factors affecting home loan tenure
Some of the factors affecting home loan tenures include –
- Home loan amount
The loan amount you need will impact the tenure of your home loan. The higher the loan amount, a longer tenure will be needed to make the home loan repayment manageable.
- Income
The borrower’s income is another important factor that affects the tenure of a home loan. A higher income can enable the borrower to repay the loan faster, while a lower income may require a longer tenure.
- Age
The borrower’s age can impact the tenure of the home loan. Lenders prefer younger borrowers with stable jobs and a longer working life ahead of them, as they are more likely to repay the loan on time.
- EMI amount
The EMI amount can also impact the tenure of the home loan. A borrower who can afford a higher EMI may opt for a shorter tenure to repay the loan faster. Whereas a borrower who cannot afford to pay higher EMIs has to opt for a longer loan tenure.
Wrap up
Several factors determine a perfect home loan tenure. When choosing a home loan tenure consider all the options available. The ultimate goal here should be to use your resources judiciously and opt for a term that does not exhaust your finances. Nevertheless, if you are planning to take a loan, go through its terms and clarify any doubts you have to avoid facing issues.
