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

Q: Can I close my home loan before my home loan tenure ends?

Lenders provide home loan pre-closure facilities, allowing borrowers to pay off their home loan before the scheduled tenure ends. By paying the entire outstanding loan amount, along with any applicable pre-closure charges, borrowers can complete the pre-closure process. The specific charges for pre-closure may vary among different lenders.

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5 min 29 Jun 2023

Highlights

Home Loan Tenor: Meaning
Home Loan Tenor: Types and Scenarios
Choosing between the Right Home Loan Tenor: Short, Medium and Maximum

What is a Home Loan Tenor?

Prospective home buyers opting for a Home Loan should carefully plan to ensure a smooth repayment experience. Since the loan amount is usually sizeable, being financially responsible becomes crucial. Borrowing wisely and cost-effectively are key for a default-free repayment process.

The Home Loan tenor is simply the repayment window during which you need to repay your Home Loan in EMIs. Given the usual size of funding, certain lenders allow you a tenor that ranges up to 30 years to make it easier for you to repay at your pace. However, a repayment tenor is comfortable only when it meets your financial and repayment capacity.

To help you understand this better and determine the Home Loan tenor that’s right for you, here’s a breakdown of a few options

Home Loan Tenor: Types and Scenarios

Short-Term Home Loan

With this option, your repayment window is shorter compared to long-term loans, which has its advantages as well as its disadvantages. Since you’re repaying your Home Loan over a shorter period, you are not paying as much as interest, which means that the total cost of the loan reduces significantly. However, to repay the loan in such a short window, your EMIs are significantly higher.

Choose a short-term Home Loan only if you’re financially strong and can handle hefty EMIs without any hassle.

Medium-Term Home Loan

A medium-term Home Loan strikes the balance between both ends and usually spans upto 15 to 20 years. Such tenors enable you to optimise your interest outgo most effectively by paying reasonably sized EMIs and still saving on your total interest outflow. If your finances allow it, such tenors are recommended, and you can consider opting for it to save throughout repayment. You can use online tools, such as the Home Loan EMI calculator  for an accurate assessment of your repayment capacity against your current financial standing.

Maximum Home Loan Tenor

A maximum Home Loan tenor is the most any lender can allow you to repay your loan amount. It typically ranges up to 40 years, breaking your repayment amount into smaller EMIs – comfortably paced out over the period. However, given the duration of the repayment process, you are also likely to rake up a higher total of interest paid, increasing your total cost of borrowing.

If you are looking to prioritise comfort and are not fazed by the increased interest outgo, opting for a maximum Home Loan tenor is a good option.

These are generally the three Home Loan tenor options that you can choose from. Ensure that you choose the right tenor based on your repayment goals and capabilities.

Here is an example to illustrate the differences in EMI and interest payable for the different types of Home Loan tenors:

Loan Amount	Tenor	EMI Amount	Interest Rate	Interest Payable	Total Amount
Rs.1,00,00,000	5 years	₹ 205,165	8.50%*	₹ 2,51,88,515	₹ 3,51,88,515
Rs.1,00,00,000	15 years	₹ 98,474	8.50%*	₹ 77,25,312	₹ 1,77,25,312
Rs.1,00,00,000	30 years	₹ 76,891	8.50%*	₹ 1,76,80,885	₹ 2,76,80,885
Rs.1,00,00,000	40 years	₹ 73,309	8.50%*	₹ 2,51,88,515	₹ 3,51,88,515

Disclaimer:- The interest rate considered here, and its subsequent calculations are for illustrative purposes only. The calculations and actuals will differ basis the individual’s profile and loan requirements.

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)
Current interest rate

What Should You Keep in Mind While Selecting Your Home Loan Tenor?

Following are the important factors that should be kept in mind while choosing an ideal Home Loan tenor:

Your current earnings vs the expenses: It is obvious that your income will determine your capacity to spend each month. If your monthly income is high, you can go for a shorter tenor and likewise, for a modest income, you can go for a longer tenor. Depending on your loan amount requirement and the debt-to-income ratio, the lenders can themselves decide the best tenor for home loan for you.
Your age at the time of borrowing: Even though the maximum loan tenor most lenders offer is around 30 years, there is a cap to the maximum age by which you can repay the Home Loan too. If you are young, you can choose the longest tenor and pay the EMIs with your convenience. The more you age, the shorter your tenor and the higher your EMIs.
The property you buy: The property you buy should not only match your current income but also the income possibility in the coming years. You should definitely aim for a good house, but you should also consider other life expenses that would rise in the future. Look for a property that suits your needs and gives you the best possible tenor.

Must Read: How To Reduce Home Loan EMI

Final Words

Bajaj Housing Finance Home Loan comes with several features and benefits. With our loan, you can get an attractive Home Loan interest rate and a flexible tenor ranging up to 40 years, basis eligibility. This allows you to choose a repayment plan based on your goals. It also allows you to make pre-payments or foreclose your Home Loan with no additional cost if you are an individual borrower with a floating interest rate.

To start your journey as a home buyer, apply online today.

*Terms and conditions apply

Frequently Asked Questions

Lenders typically provide a maximum home loan tenure of 30 years, but the actual duration may vary based on your age and the policies of the specific bank you choose. It is advisable to inquire with your selected lender to determine the maximum home loan tenure they can offer based on your circumstances.

Lenders provide Home Loan pre-closure facilities, allowing borrowers to pay off their Home Loan before the scheduled tenor ends. By paying the entire outstanding loan amount, along with any applicable pre-closure charges, borrowers can complete the pre-closure process. The specific charges for pre-closure may vary among different lenders.

The Home Loan tenor is decided by the lender based on your monthly income, age and other eligibility factors. A Home Loan tenor of 20 years may be convenient for you if your monthly income allows you to make the monthly repayments comfortably for this tenor.

A long repayment tenor may be beneficial if you lower monthly EMIs. This way you would be able to repay your Home Loan conveniently without compromising with other financial expenses.

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