6 Steps to Choose Your Ideal Home Loan Tenure

Choosing the right home loan tenure is essential for balancing monthly EMIs and long-term interest savings.

In this home loan guide on Ghar, we explore 6 crucial steps to help you select the perfect home loan tenure, ensuring a financially sound decision.

Whether you prefer a short, medium, or long tenure, understanding the factors involved will help you make an informed choice. Read on to discover how to optimize your home loan experience.

Step 1: Understand Home Loan Tenure Options

Home loan tenures typically range from five years to 30 years, depending on the lender and the borrower’s preference. A couple, Priya and Anil Desai from Mumbai, selected a 15-year loan plan, sticking to a tight budget to pay a higher EMI, and became loan-free within 12 years due to their financial discipline.

Conversely, Raj and Meera Sharma opted for a 30-year plan, enjoying lower monthly payments and gaining financial stability in 28 years despite challenges. The tenure choice is personal and heavily influenced by future goals and aspirations.

Step 2: Know the Types of Home Loan Tenure

• Short Tenure (5-15 years): This results in higher EMIs but lower total interest payments. Kaushik Jain, founder and CEO of EasyLoans, highlights that this option saves on interest costs but requires higher monthly payments.

• Medium Tenure (15-20 years): This strikes a balance between affordability and long-term interest costs, suitable for borrowers with moderate income levels seeking manageable EMIs.

• Long Tenure (20-30 years): While EMIs are lower, the total interest paid is higher. Atul Singh, CEO and co-founder of Smart Home Loan, explains that this option is ideal for those seeking lower EMI options to manage monthly cash flow more effectively.

Step 3: Assess Your Financial Position

Evaluate your current and expected future income stability. Choose a tenure that aligns with your income to ensure timely repayments. Singh suggests considering your financial goals and stability when making this decision.

Step 4: Consider Your Age and Future Plans

Consider your life stage, future plans, and career trajectory. Younger borrowers may opt for longer tenures, while those closer to retirement might prefer shorter ones. Jain adds that longer tenures can be beneficial for accumulating savings for retirement, education, or investments.

Step 5: Evaluate Loan Amount and Down Payment

Higher down payments reduce the loan principal, leading to lower EMIs and overall interest costs, potentially allowing for a shorter tenure. Make a substantial down payment to minimize your loan amount and interest burden.

Step 6: Check for Prepayment Flexibility and Financial Cushion

• Prepayment Flexibility: Ensure the lender permits prepayment without penalties or offers flexible repayment options. Ayaan Rao, managing director of RealtyWise India, suggests verifying prepayment terms.

• Financial Cushion: Maintain an emergency fund to cover unforeseen expenses or income disruptions, ensuring that EMIs remain manageable even during financial challenges to avoid defaulting on repayments.

Step 7: Evaluate the Property’s Age

Assess the property’s age to ensure alignment with the loan tenure. Jain concludes that understanding the property’s age helps avoid tenures exceeding the property’s useful life, mitigating risks associated with aging constructions.

By following these six steps, you can choose an ideal home loan tenure that balances interest savings and manageable EMIs, aligning with your financial goals and lifestyle.