When applying for a home loan, you’re likely to face the common dilemma of choosing between a longer tenure loan and a relatively shorter one. Typically, the debate is between home loan tenure of 15 years vs. 30 years. However, experts recommend going for longer tenure home loans for various reasons.
Let’s take a closer look at the reasons why home loans with longer tenures are preferable.
1. Affordable EMIs: One of the biggest advantages of going for a longer tenure loan is that it will ease the burden of having to pay a substantial EMI amount on a regular basis. Additionally, it will allow you to retain the option of paying off the loan earlier than decided as and when you have the financial resources to do so.
2. Option of parallel investments: Another advantage of opting for a longer tenure loan at the outset is that it allows you to explore parallel investment options, such as stocks, rather than forcing you to channel all your savings into your EMIs. Once you have made a profit on those parallel investments, you can always liquidate the amount and use it to pay off your loan faster.
3. Allowance for future expenses: Longer tenure loans also allow you to take care of any major expenses that may come up in the future. For instance, if you’re looking to set up your business, buy a car, or pay for your child’s education, then a longer tenure loan will ease the burden of having to pay up too much too soon while still enabling you to be a homeowner.
4. Tremendous flexibility: Even when you’re opting for a long tenure loan, it’s useful to remember that you still have the flexibility to pay off your loan as you like. This will not be the case when you go for a shorter tenure. You can turn a long tenure into a short one, as and when you have the flexibility to make pre-payments, but you cannot turn a short tenure into a longer one without paying a hefty penalty.
5. Tax benefits: Signing up for a shorter tenure loan can affect the tax savings that you can avail of against the home loan. As long as your income falls under the 30 per cent tax bracket, you can avail of the highest tax benefits by opting for a longer tenure home loan.
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