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As the average homebuyer's age has dropped from 40s to 27-30, many banks and housing finance companies offer 30-year loans. However, age isn't the only factor that helps one secure such loans.
For long-term loans, lenders typically prefer customers with a particular profile. Besides being young, one might also have to be a professional or self-employed. Renu Sud Karnad, managing director at HDFC, says, "Loan tenures of up to 30 years is meant for customers with a particular profile — youngsters who have only some years of work experience and are preferably professional, as their incomes might grow exponentially. It is the lender's prerogative to give you a tenure it is comfortable with."
HDFC and ICICI Bank offer 30-year home loans at 10.15 per cent (up to Rs 75 lakh). DHFL offers it at 10.25-10.5 (up to Rs 30 lakh) and 10.50-11 per cent (more than Rs 30 lakh).
A housing loan of Rs 50 lakh for 30 years at 10.15 per cent will mean equated monthly instalments (EMIs) of Rs 44,434; a similar loan for 20 years will mean EMIs of Rs 48,749: The difference works out to Rs 4,315 a month, or Rs 51,782 a year.
V N Kulkarni of debt-counselling centre Abhay, says, "The biggest drawback of this product is you have to pay more interest because you choose a lower EMI." For a housing loan of Rs 50 lakh for 30 years at 10.15 per cent, one pays Rs 1.09 crore as interest, while one pays Rs 67 lakh for a similar loan for 20 years: the difference works out to Rs 43 lakh. But lenders argue the tax benefits are for a longer term, too.
For such loans, the tenure should not extend into the post-retirement period for a borrower---if one retires at 58, she/he has to be less than 28 to qualify for such a loan.
But sometimes, such loans are also sanctioned to those aged more than 30, says Karnad. "For those above 30, we may approve the loan with a step-up repayment facility. Here, the lender reviews the borrower's repayment capability after fixed periods and increases the EMI. For instance, a borrower starts with an EMI of Rs 10,000, which is increased to Rs 12,000 after three years and to Rs 15,000 after another three years and so on, in a manner that the term does not extend into the post-retirement period," she says.
Deo Shankar Tripathi, president and chief operating officer of DHFL, says the company doesn't lend to those with volatile incomes — stock brokers, freelancers, artists, etc. But self-employed individuals could secure such loans even at the age of 35, as these individuals don't retire till the age of about 65. "We also see if the property being bought will be marketable in unforeseen circumstances," he says.
If you do not fall in the category of borrowers such products are meant for, lenders might seek a co-borrower because in a rising rate environment, tenures might stretch beyond 30 years. This might not be easy for some borrowers (say, youngsters), as banks do not allow extension of loans beyond 30 years. In such cases, borrowers will be bound to prepay.
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