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How to Pick the Best Home Loan Tenure to Suit Your Pocket

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  • Highlights

  • Factors that influence Home Loan Tenure

  • Choosing the maximum home loan tenure

  • Choosing a short-term home loan

  • Choosing a medium-term home loan

For prospective homeowners, opting for a home loan requires careful planning. Since the loan amount is usually quite substantial, the financial responsibility is equally large. Borrowing wisely and cost-effectively is thus crucial for a hassle-free repayment experience. Learning about the key components of home loan finance and borrowing can help with this and understanding how to choose the best home loan tenure is a good first step.

The home loan tenure is simply the repayment window during which you need to repay your home loan with EMIs. Given the quantum of funding on offer, certain lenders allow you to opt for a tenure that ranges up to 30 years, which is plenty of time for easy repayment. While this may seem like the safest route, there are both upsides and downsides to it.

To help you understand this principle better and determine the home loan tenure that’s right for you, here’s a breakdown of a few options.

Factors that influence Home Loan Tenure

Choosing the maximum home loan tenure

The maximum home loan tenure is the first option to consider as it gives you a good understanding of the lowest EMI possible. Let’s say you opt for a tenure of 30 years, which is the maximum home loan tenure offered by the Bajaj Housing Finance Home Loan. While this does mean that you have ample time to repay your dues, it is important to remember that you will be paying interest for those many years as well. This means, the longer the repayment tenure, the costlier the home loan.

It is at this stage that you should be clear about your repayment goals. If you’re looking to prioritise comfort and aren’t phased by the increased interest outgo, opting for the maximum home loan tenure is a good option. This way, your EMIs are as low as they can possibly get for the given loan terms, such as the interest rate and the principal, and you don’t have to strain your personal finances to accommodate them.

Must Read: What is Top Up Loan

Choosing a short-term home loan

On the opposite end of a maximum home loan tenure is a short-term home loan, which generally involves a tenure of about 5 years. With this option, your repayment window is much shorter in comparison and this has benefits as well as disadvantages. Since you’re repaying your home loan over a shorter period of time, you aren’t paying as much interest, which means the total cost of the loan reduces significantly. However, in order to repay the loan in such a short window, your EMIs are much higher in comparison to choosing the maximum home loan tenure.

With this option, your savings are significantly higher, but chasing savings without strategically planning for it is not smart. In an attempt to keep your interest outgo minimal, your EMIs may be too difficult to manage. This could leave you vulnerable to defaulting in case your income decreases or when you have emergencies to finance. Only opt for a short-term home loan if you’re financially strong and can handle large EMIs without a problem. In such cases, having savings to rely on to pay EMIs during a cash crunch is a good option.

Choosing a medium-term home loan

A medium-term home loan strikes the balance between the extremes and may involve a home loan tenure that ranges between 15 to 20 years. Within this bracket, the total interest outgo varies very slightly in comparison to the other options. It is here that you can optimise your outgo most efficiently. If your personal finances allow for it, you can find the best home loan tenure and save money over the course of repayment. Using tools like the home loan EMI calculator works best as it gives you a clear picture of the total outgo, EMIs payable and interest payable.

These are generally the three home loan finance tenure options available to you. Be sure to consider each and every one wisely based on your repayment goals and capabilities.

Here is an example to illustrate the differences in EMI and interest payable over 3 home loan tenures.

Loan amount Tenor EMI amount Interest rate Interest payable Total amount
Rs.1,00,00,000 5 years Rs.2,17,424 11 Rs.30,45,464 Rs.1,30,45,464
Rs.1,00,00,000 15 years Rs.1,13,660 11 Rs.1,04,58,646 Rs.2,04,58,646
Rs.1,00,00,000 30 years Rs.95,232 11 Rs.2,42,84,601 Rs.3,42,84,601

For first-time borrowers, finding the best home loan tenure can be tricky. To help you make your decision, here are the factors that you should consider:

  • ● Your income (current and prospective)

  • ● Your monthly expenses (both fixed and fluctuating)

  • ● Your savings (current and future)

  • ● Your age (which helps you understand the earning years ahead of you)

  • ● The interest rate of the home loan you are considering

Picking the best home loan tenure is definitely something that takes time and preparation. Once you list the factors above, you can use the home loan EMI calculator to find the best option. This may require you to tweak the tenure multiple times to arrive at the right EMI. Also keep in mind that you can talk to your lender about increasing your EMI and decreasing your chosen tenure even down the line as you start your home loan’s repayment. It is thus best to opt for a lender who is known for flexibility.

Must Read: How To Reduce Home Loan EMI

One such option is the Bajaj Housing Finance Home Loan which comes with many value-added features for added convenience. With this loan, you have access to attractive interest rates and a flexible tenure ranging up to 30 years. This allows you to comfortably choose a repayment plan based on your goals without risking default or restricting your ability to accumulate wealth. It also offers you property search services as well as the ability to make pre-payments or foreclose your loan at no added cost as an individual borrower.

To start your journey as a homeowner, apply online and get quick approval!


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