Here is how you must select an ideal tenure for your home loan to experience hassle-free repayment. Read on to learn about the key factors that impact the choice of opting for a home loan repayment tenure depending on your financial preference. Purchasing a home either through a Citibank home loan or Tata Capital home loan is one the costliest investments most encounter or perform during a lifetime. Gone are those days when many used to save funds all through the working years to purchase a home. In today’s time, doing so is not possible financially, as property prices are surging day by day. Moreover, potential home buyers require financial help to purchase a home or property for themselves.
A home loan is a kind of financial support offered by financial institutions to assist you in buying, construct, rebuild and renovate your home with ease. Financial institutions are even referred to as lenders. Home loans are generally long-term loans than the usual vehicle loans or personal loans that lenders offer after an in-depth evaluation of the eligibility of the applicant. Moreover, the eligibility of a specific property for which the credit option is applied is even taken into account. Continue reading to understand the repayment tenure for a home loan that you must apply for. Additionally, there are also details linked with the application procedure, repayment schedule and set of documents required.
What is known as home loan repayment tenure?
The overall repayment period for a home loan is addressed by the term ‘tenure’. The highest tenure of the home loan is based on different parameters like age, time left for retirement, monthly expenditures, monthly income, etc. Banks and various other financial lenders provide the highest home loan repayment tenure of 30 years. However, they even require you to repay the loan before you retire from your employment services. You, as a home loan applicant, can select your repayment schedule depending on your financial preferences. There are 2 major kinds of home loan repayment tenures – long-term home loans and short-term home loans. Let’s understand here which one you must select.
Short-term tenure or long-term tenure for a home loan – which tenure must you select?
The choice of home loan tenure is based on your yearly and monthly debt obligations. If you hold a higher income and fewer debt obligations, you will simply be able to pay a bigger portion of your income as home loan EMI. In this scenario, selecting a short-term tenure for a home is advisable.
On the contrary, if you hold a considerable number of debts every month, you must ensure to divide your home loan proceeds into smaller portions and select a long-term home loan repayment tenure for hassle-free repayment. There are various other parameters too that you must account for and note when selecting a home loan repayment tenure. Keep reading to better understand.
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What are the parameters impacting the home loan repayment tenure?
Read on to find below specific key parameters that impact your home loan repayment tenure.
∙ Your age – Your age is one of the crucial parameters that impact the choice of your home loan repayment tenure. Most financial institutions offer a repayment tenure of as high as 30 years or until the age of retirement. The age of retirement for employees in India ranges anywhere between 58 and 65 years. Read on below the know the details for the employees working in distinct streams.
| Employee types | Age of retirement |
| State government employees | Between 56 and 60 years |
| Private sector employees | 58 years |
| Central government employees | 60 years |
In the scenario of self-employed individuals, the highest repayment tenure can be up to 30 years for the age groups between 60 and 65 years. The repayment tenure duration differs from lender to lender. An individual availing of a home loan in the early years of employment can use the benefit of higher repayment tenure, which converts to a lower EMI requirement or higher loan proceeds.
Home loan proceeds – Home loan proceeds are another important parameter that impacts your home loan repayment tenure. Lenders form home loan repayment schedules depending on the sum of principal loan proceeds and applicable interest constituent on the basis of the home loan rate offered. You, as a borrower, get the flexibility to choose the duration depending on your monthly income and home loan instalment. For instance, if the overall home loan proceeds are over 3 per cent of your income (yearly), you can save considerably on the interest by selecting a shorter home loan repayment tenure.
Existing loans and debts – As mentioned already, you must ensure to keep in mind your prevailing debts and loans before selecting the home loan repayment tenure. You may even consider settling a few such debts or combining them into one loan to enhance your capacity to borrow. You can also select a higher repayment tenure and lower your instalment amount on the home loan. In this way, you can simply continue to manage all your existing outstanding debts while enjoying the benefits of a home loan.
Loan repayment potential – Your potential to repay your home loan even impacts the choice of your home loan repayment tenure in distinct ways. For instance, you can opt for a home loan instalment amount depending on your budget requirements (monthly). If you select to pay a higher amount on the home loan each month, the repayment tenure on the home loan will be short. In the same way, if you select to repay your overall home loan proceeds in smaller instalments, your loan repayment tenure will be higher.
What is the prudent home loan repayment tenure?
While availing a home loan, there’s no ideal or best tenure as such. Selecting a repayment tenure is totally based on your financial status, preferences, and other important goals in your life. Few may consider paying a higher loan EMI and closing the home loan as early as possible. This permits you to make higher savings in your midlife. A huge number of applicants for home loans may select to pay the lowest EMI possible so that they get a higher cash flow to meet their other expenditures. However, few may look to strike a good balance between paying the loan faster and having a satisfactory disposable income.
So, with proper financial planning and regular savings, long-term repayment tenure home loans may be closed as early as possible by making smaller prepayments along with regular EMIs. It gives good flexibility in availing of a higher home loan amount while paying a lower EMI.