When buying a home loan, choosing a suitable repayment tenure plays a crucial role in your home loan journey. It requires careful planning so that you enjoy a hassle-free repayment experience. Has it ever happened to you that you are not able to pay your home loan equated monthly instalments (EMIs) comfortably? One of the reasons could be a selection of loan terms or repayment tenure.
A home loan tenure is the repayment period during which you are required to repay the loan along with interest in EMIs. Almost all lenders provide a maximum tenure of up to 30 years. In fact, while borrowing a home loan, you have the flexibility to select the tenure as per your financial stability. Given the ease of choosing the repayment window, you need to ascertain some could help you pay the loan amount without much worry.
Below are the factors that influence the home loan tenure:
- Monthly Income:
If you are going to apply for a home loan, then the EMI will account for 50% of your monthly income. If you do not have a major liability other than the home loan and have a higher monthly income, then you may opt for a shorter tenure. However, the EMI would be on the higher side, and this will also help you repay the loan amount faster. A longer tenure would mean affordable EMI, but the interest charges would be high.
- Monthly Expenses:
The decision of choosing the tenure also depends on how much you spend on a monthly basis. Evaluate your spending and then decide what EMI would be affordable for you. This will help you understand how much loan term you should opt for.
- Age of the Borrower:
While applying for a home loan, banks also focus on age. Usually, younger borrowers find it convenient to opt for a longer repayment tenure in comparison to borrowers who are middle-aged. Middle-aged borrowers are mostly expected to repay the home loan in a shorter time period. Therefore, you should think about your age too while selecting a tenure.
- Retirement:
Retirement age should be considered while choosing a home loan tenure. It is always advisable to pay off your debt ahead of your golden years. Nobody would want to spend their retirement phase struggling to repay the loan. If you plan to retire at the age of 60 years, then you should aim to repay the home loan by the age of 50 or a maximum of 53.
- Savings
If you have accumulated savings that enable you to make a maximum down payment with ease, then you should do so. This will ultimately bring down your home loan amount. You can choose a tenure as per financial requirements. With the reduced loan amount, if you think you will be able to repay it in a shorter tenure of 15 years, then don’t hesitate to do so. The home loan interest rate will also be lower. As per the current scenario, you can avail of a home loan at the rate of 6.75% per annum.
Long term or short term: which is the best home loan tenure?
There is no best choice when it comes to selecting a home loan tenure. It depends on individual needs and financial capabilities. If you are not bothered about the interest rate and want to pay the loan comfortably, then you can opt for a longer tenure of up to 30 years. On the other hand, if you have the financial capability to pay higher EMIs, then you can choose a shorter tenure. Using a home loan EMI calculator is the best if you want to know the EMI, interest outgo and repayment tenure.
