Home loan tenure long or short which is better In 2024

When applying for a Home Loan, consider factors such as interest rate, maximum amount, penal charges, foreclosure conditions, and Top-Up Home Loan availability. The loan tenure, also known as repayment tenor, is crucial for your financial future. It is the time frame during which you repay the loan amount and interest component in the form of EMIs.

The repayment tenor of a home loan can vary significantly depending on the chosen financial institution. Bank of Baroda Home Loan offers a repayment tenor ranging from 5 to 30 years. Some borrowers prefer short tenures, while others prefer long tenures for lower EMI liabilities. The decision to choose the loan tenure is complex and requires careful consideration of various aspects. A comparative analysis of long and short term tenures for home loans is provided.

• Interest rate : The interest rate on a home loan is a crucial factor that significantly influences the final decision. Short-term loans have lower interest rates compared to long-term loans, as lenders can estimate potential interest rate movements more accurately in the short run. Home Loans have a 30-year repayment tenor, making interest rate movements unpredictable. To cover this risk, lenders charge higher interest rates for long-term loans. To save on interest, make your spouse a primary applicant, as leading banks like HDFC Home Loan offer lower rates for women applicants.

• Interest cost : The duration of your Home Loan tenure significantly impacts the interest cost you will bear. Longer repayment tenures result in higher total interest costs due to longer interest rates, while shorter tenures result in lesser interest costs due to shorter durations. Therefore, it’s crucial to consider the entire loan cost before making a decision.

• EMI amount : The amount of monthly EMI (EMI) is a crucial factor in choosing a home loan. Short-term loans have higher EMIs than long-term loans, which offer lower EMIs. However, longer repayment tenures come with higher interest costs and longer periods to become debt-free. To make the best decision, it’s essential to strike a balance between short repayment tenure and the EMI amount you can afford. This will help you choose the right loan for your needs.

•  Mortgage of the property : A Home Loan is a secured option where your property is mortgaged with the lender until you repay the loan. The longer the repayment tenure, the longer your property is mortgaged with the bank. The shorter the repayment tenure, the quicker you become debt-free and can access additional funds through a property loan.

• Objective of the purchase : When purchasing property for investment, a short-term Home Loan is recommended to avoid foreclosure charges and ensure a good deal. For self-use, longer repayment tenure is recommended due to lower EMIs and reduced risk of default. This allows for comfortable living while making repayments, allowing for a smoother transition to a new property. The choice between a short-term or long-term Home Loan depends on your repayment capacity and the availability of a short-term liquid fund for unforeseen expenses. If finances allow, opt for a shorter tenure to save on interest costs and achieve debt-free status sooner, ensuring a smoother financial journey.

The maximum duration for home loan repayment is specified

The maximum tenure for a home loan refers to the duration between the borrower and lender, where the loan is repaid through equated monthly instalments (EMI) and can last up to 30 years, only applicable if the borrower applies at a young age and clears the loan before retirement.

Long-term home loans allow borrowers to manage their funds without increasing monthly expenses. These loans meet lenders’ increased loan criteria eligibility and offer manageable and affordable monthly EMIs. However, maximum tenure for home loans can be more expensive than minimum tenure. Therefore, it’s crucial to choose the most favorable option for loan repayment based on convenience and capability.

The minimum tenure for a home loan is a certain amount of time

The minimum tenure for a home loan is short-term repayment, typically lasting less than 5 years, with borrowers typically repaying within two years.

The minimum tenure for home loan repayment depends on the borrower’s capacity, as the EMI and loan tenure are reciprocal. If the period is shorter, the EMI is higher, and the borrower saves on total interest in a shorter period, unlike the maximum tenure for home loan repayment.

Longer tenure increases home loan eligibility for higher loan limits. Home loans are based on floating interest rates, which can lead to larger paybacks once rates are revised. However, it’s crucial not to let EMIs exceed your budget or burden your peace of mind, as this can disbalance your financial situation.

Maximum tenure” and “minimum tenure” understanding of the employment relationship

The EMI for a housing loan is determined by the combination of the loan tenure and interest rate, with the EMI calculated in favor of the borrower using the reducing balance method.

Home loan tenure is determined by financial capability, with younger applicants receiving the maximum tenure, while older applicants must accept shorter tenures due to the home’s return before retirement age or lender-determined cut-off age.

Factors to consider when selecting a home loan tenure

The repayment period for a home loan is determined by various factors, including the loan amount. If the borrower’s loan is large, short tenure may not be possible due to the steep principal and interest components, especially if the repayment is urgent.

Repayment is directly proportional to capacity, and after calculating using a home loan EMI calculator, you can divide the repayment amount according to your convenience and set a target to adjust EMIs accordingly.

Lenders are cautious about borrower age, so older individuals can apply for home loans with a co-applicant, provided they have a healthy credit score to guarantee the loan application, as the younger applicant needs a strong credit score.

Borrowers can plan their home loan repayment tenure with a bulk prepayment, enabling early loan payment, lower EMI rates, and reduced interest costs. They can also opt for foreclosure by prepaying the outstanding loan amount or make partial prepayments multiple times during the maximum tenure for a home loan.