Why opting for a long home loan tenure might be beneficial

When it comes to buying a home, individuals nowadays turn to availing a home loan which was not the case until a few decades ago. This is mostly because of increasing urbanisation, easy availability of home loans and higher earnings.

While it is good that individuals are availing home loans in order to buy or construct their dream home, it brings us to the question about the loan repayment tenure. In case you avail a home loan, should you opt for a short tenure or long one? While many individuals opt for a short one in order to clear the debts quickly, it is beneficial to opt for a long tenure.

Here, we take a look at the advantages of availing a home loan with a long tenure. Read on to know more.

• You can avail income tax benefits – By opting for a long repayment tenure, you can avail benefits on the interest payment with regard to home loans. Given that there are no alternative tax benefits which are as efficient as that on home loan interests, it is better to avail it for as long as you can. Moreover, you are allowed a deduction of up to Rs.1.5 lakh for repayment of the principal component of a housing loan under Section 80C of the Income Tax Act. It must be noted that for a short repayment tenure, the principal component will be higher and you will be not be able to claim the deduction beyond the specified limit.
• There is greater flexibility – Long repayment tenures offer you a lot of flexibility. Irrespective of you taking the home loan under a fixed or floating rate of return, there is no penalty on prepayment. You can opt to prepay the entire loan amount or a part of it in a bid to be free of debts. The option of prepayment without needing to pay a penalty enables you to repay the loan depending on your cash flow.
• You can eligible for a higher loan amount - Another advantage that comes with having a long repayment tenure is that you are eligible for a higher loan amount. Given that, your home loan eligibility is determined by your ability to repay the loan amount in the form of Equated Monthly Instalments (EMIs), a long tenure means a smaller EMI. This is not the case when you opt for a shorter tenure as the borrowed amount will be required to be repaid in large EMIs. Lenders also offer a higher loan amount when you to choose a longer tenure and helps you in buying a bigger or better house.

Home loans have come to the rescue of many when planning to buy or construct their abode. However, when looking to avail the loan, considering about the repayment tenure is also very important. While almost everyone wants to clear the loan soon and become debt-free, it can prove beneficial to select a longer repayment tenure as it can be beneficial on various counts as highlighted above. In case, you are planning to buy a house of your own, opting for a long tenure will hold you in good stead.