The Pros and Cons of Longer Home Loan Duration

With the rapid increase in urbanization and the easy availability of home loans, many individuals have been investing in the residential market like 3bhk flats in Mohali in their 20s. However, home loans are generally long term to ease out the monthly liability on the borrower. While the interest rate is decided by the bank but tenure is something that would be the borrower’s call. While the maximum tenure could be as long as 30 years but narrowing down on the duration depends on the down payment, your financial situation, and the future plans with the property in consideration.

Let’s take a look at the pros and cons of opting for longer home loan tenure:

Pros of longer home loan duration

Less EMIs-The biggest advantage of longer home loan tenure is lower EMIs. Lower monthly installments put the fewer burdens on the pocket and convenience for buyers investing in property at the early phase of life.

More Flexibility- With the longer tenure home loan you have greater flexibility to plan and manage your finances. You might have started with lower EMIs as per your income; however, with time you can increase the monthly installments to repay the loan quicker than the allotted time. Also, with longer tenure, you could enjoy the flexibility of more savings for any other investment in the future.

Higher loan eligibility- Longer the tenure, more are the chances of higher home loan. Home loan eligibility of an individual is based on the income and further the capacity to pay the monthly installments. If the tenure is longer, you could get a higher loan amount since the EMIs will be lesser in proportion to your income. This would enable you to buy a better property at a promising location.

Cons of longer home loan duration

Increase in the total cost of the property- With a longer tenure of home loan, you end up paying more interest as per the extended duration. It increases the cost of acquiring the property than the original amount.

Higher Interest- If the interest rate increases in this duration then banks increase the tenure than increasing the monthly installments. Hence, adding up more interest to the total repayment amount.

Restriction on the future investments- If you have taken home loans with a longer tenure, then it 

might impact your eligibility for any other loan. Since banks pay attention to your ongoing loans and the current income.

Taking a home loan is a long term commitment and goes on for many years. Hence, it is important to carefully plan your finances and future plans before applying for a home loan and deciding on the tenure.