Home loans are an ideal tool to fulfil the lifetime dream of owning a house for most individuals. Also, many lenders are offering lucrative deals on home loans at present. Thus, on choosing the optimal repayment period, one’s monthly EMIs become easily manageable.
In India, the maximum tenor for a home loan is 40 years. However, this depends on the lender and there are several factors to consider while deciding the tenor.
Should one apply for a housing loan with the maximum or minimum tenor?
The ideal home loan tenor is usually based on a borrower’s present financial obligations and income prospects. It also depends on the terms that a lender offers.
Financial advisors suggest people go for the minimum home loan tenor when they have a sound income and negligible active debts. It is a strategy that enables one to save a significant part of income that would otherwise have been paid as interest.
Contrarily, if the potential borrower has multiple ongoing debts or unavoidable fixed expenses, they must choose a long repayment window. It improves their borrowing capacity for other smaller loans and contributes to a healthy financial state.
At the end of the day, whether one selects a 5-year tenor or a prolonged repayment period of 20/30 years, the better choice depends on one’s goals. For instance, many borrowers prefer lower EMIs to ensure they have enough cash in hand to deal with unexpected expenses.
What factors influence the tenor of a home loan offer?
Whether a loan applicant can get the maximum tenor for a home loan, depends on these factors:
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Age
Banks and NBFCs offer home loans with a longer term to candidates who are in their early years of employment. Furthermore, lenders have maximum age limits beyond which borrowers cannot extend their loan’s tenor. This is because the lenders have greater confidence in these individuals’ repayment potential. Subsequently, this results in low EMIs but a greater repayable amount.
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Principal borrowed
Lenders give significant weightage to this factor while deciding one’s repayment schedule. Therefore, it is recommended to request a manageable loan amount to get a favourable tenor and the lowest home loan interest rate.
Every lender nowadays provides an online home loan EMI calculator on their website. One can use this tool to understand if the loan terms forwarded to them will improve their repayment experience.
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Existing Loans
When a person has existing debts they are less likely to get a short repayment schedule of 5-10 years. Thus, it is better to assess one’s overall financial obligations before applying for a home loan.
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Repayment Potential
Lenders ask for certain documents like the borrower’s recent bank statements and credit reports to assess their loan repayment capacity. Based on the information, the lending institution permits a tenor range that justifies the candidate’s existing income and expenses.
Who is eligible for a home loan?
The criteria discussed below will give a clear idea regarding who is eligible for a home loan:
- For salaried people, the age bracket must be between 21 – 65 years.
- For self-employed individuals, the age limit can vary between 21 and 75 years.
- The person opting for a loan amount should stick to a repayment window of less than 30 years.
- Before applying, one’s credit score must be good or excellent and should not indicate poor borrowing practices.
- There must be minimum existing debts like car loans, outstanding credit card bills, etc.
Apart from this, each lender sets their own minimum income criteria for candidates interested in taking a home loan. For a clearer understanding before applying, it is advised to use the concerned lender’s home loan eligibility calculator and check their terms and conditions.
Nowadays, several lending institutions are offering pre-approved loans to selected clientele based on their credit profile. These offers are related to loan products like LAPs, home loans, etc. Candidates can give their contact details to these lenders to check their eligibility for these deals.
Building a long-term relationship with the existing loan partner can help one secure the maximum tenor for a home loan and simultaneously save adequate interest amount. It is also a good practice to not switch lenders too often and to do proper research before buying one’s dream home.
