What is home loan tenure?
Home loan tenure refers to the pre-decided period over which you repay the loan amount, along with interest. It defines the duration for borrowing funds from the lender and determines the time frame for repayment. The tenure of your home loan significantly influences the interest rate and the number of EMIs you must pay. Lenders typically offer flexibility in choosing between a home loan minimum tenure and a home loan maximum tenure, allowing borrowers to align repayments with their financial capacity. It’s crucial to evaluate the tenure carefully before applying for a home loan to ensure manageable repayments.
Long-term vs. short-term: Which home loan tenor is better?
The exact tenor suitable for you depends on your financial profile. For example, if you have a sizable income, with few or no obligations, a short tenor is suitable for you. With a short tenor, you can repay the loan sooner and become debt-free quickly.
On the other hand, if you have a significant number of obligations, it is better you opt for a longer tenor. With a long tenor, your EMIs are relatively low, enabling comfortable repayment on a monthly basis.
Aspect |
Long-term tenure |
Short-term tenure |
Time period |
Long-term home loans are typically for more than 5 years, with a home loan maximum tenure extending up to 32 years. |
Loans with a repayment period of 5 years or less are considered short-term. |
Interest rates |
Longer tenures offer extended repayment periods, often resulting in lower interest rates. |
Short tenures generally come with higher interest rates due to the limited repayment time. |
EMI amount |
EMIs are lower because payments are spread over a longer duration. However, total interest paid is higher over time. |
EMIs are higher due to the shorter repayment window but save on total interest costs. |
Loan amount and disbursal speed |
Higher loan amounts are offered for long-term tenures, but approval may take longer as lenders conduct detailed credit checks. |
Smaller loan amounts are typical for short-term tenures, with faster approval and disbursal. |
Things to consider when choosing a home loan tenure
When availing of a home loan, it’s essential to evaluate your disposable income, years of active employment left, and any expected changes in income or financial obligations. The loan tenure plays a crucial role in determining your EMI, a regular commitment for years ahead. Therefore, assess not just your current affordability but also your future financial stability and needs.
Here are a few factors to consider:
EMI:
A longer tenure reduces your EMI, while a shorter tenure increases it.
Interest rate:
Longer tenures often attract higher interest rates, increasing the total loan cost.
Financial commitment:
A longer tenure extends your financial obligation, impacting long-term financial stability.
Rate fluctuations:
Loans with longer tenures are more vulnerable to interest rate changes, affecting overall repayment.
Affordability:
Keep your home loan EMI within 35% of your gross income for better financial balance.
Tenure adjustment:
You can modify your loan tenure, but it may incur additional costs.
How to select the ideal home loan tenure?
Choosing the right home loan tenure depends on your financial goals and repayment capacity.
- Assess your financial stability: Evaluate your income, expenses, and savings to determine how much EMI you can afford.
- Short-term tenure: Higher EMIs but lower total interest. Ideal if you have a high, stable income.
- Long-term tenure: Lower EMIs but higher total interest. Suitable for managing monthly budgets.
- Future goals: Consider upcoming financial commitments like education or retirement.
- Use a loan calculator: Tools like a home loan EMI calculator can help you compare options.
- Strike a balance: Choose between home loan minimum tenure and maximum tenure for financial stability.
*T&C apply
FAQ
The maximum home loan tenure offered by most lenders is around 30 years. However, with Bajaj Finance, you can opt for a tenure of up to 32 years, providing greater flexibility in managing your EMIs.
The minimum home loan tenure typically starts from 5 years, depending on the lender. Shorter tenures result in higher EMIs but reduce the total interest cost over the loan period.
The tenure of a home loan is the period during which the borrower repays the loan amount and interest.
Yes, you can take a home loan for 15 years. This tenure balances manageable EMIs and reduced interest costs compared to longer tenures like 30 years.
A 30-year home loan is beneficial if you want lower EMIs and flexibility in monthly budgeting. However, you pay more in total interest over such a long tenure.
A 15-year home loan is a great option if you can manage higher EMIs. It helps save significantly on total interest compared to a 30-year loan.
Yes, home loans are available for 10 years. This tenure allows you to repay faster while balancing EMI affordability and lower total interest costs.
