Owning a home isn't an ordinary fact. In fact, it is a very commendable accomplishment. Owning a home isn't easy, it takes a lifetime of savings and since most of us don't have enough cash to wake up and decide to buy a home on any given day, owning a home also comes with a huge financial responsibility. Home loans have long tenures and huge amounts to be repaid.
The maximum tenure of a home loan can stretch up to 30 years. Now this in itself is quite a long period of time but stretching out the tenure may come with the added benefit of reducing monthly instalments. In the long run, the borrower will have paid more through interest but with a lower instalment amount, it becomes easier to manage payments and work around monthly finances and budgets.
The maximum available tenure when it comes to home loans offered by most banks is 30 years. This figure however is not an absolute number and depending on the age of the applicant, tenures offered can be much lower. Usually home loans are given out in such a way that by the end of the loan tenure, the age of the applicant does not exceed 65 or 70 years. So, if an applicant gets a head start on owning a home and manages to come up with down payments and takes out a loan at the age of 25, the maximum loan tenure offered is 30 or 35 years which means by the time the applicant is 55 or 60 years, the loan would have been repaid. However, if the applicant decides to take a loan out by the time he attains 45 years of age, the maximum loan tenure offered is going to be only 20 to 25 years.
Maximizing Loan Tenures:
While the Monetary Authority of Singapore has restricted the maximum loan tenure of home loans in Singapore to 35 years, chances are that an applicant won't be provided with this tenure. The age of the applicant at the time of borrowing the loan is one of the deciding factors in getting a long tenure. In such cases applicants can go in for a joint application loan. Joint application loans can give applicants a longer tenure if they co-sign someone younger than them. For instance, an applicant aged 50 years can opt for a joint home loan with his son aged 25 years and avail a longer tenure closer to the 30 year mark.
Benefits of Longer Tenures:
Sure, longer tenures result in more interest paid but they do come with certain advantages. Firstly, an applicant can lower their monthly instalments allowing them to not only manage payments better but also to save more and probably close the loan early. This usually attracts an early settlement fee but still saves a lot more interest in the long run.
Investors can also benefit from longer tenures. Longer tenures lead to smaller monthly payments and higher returns from rent.
Longer tenures and lower instalments bring with it a decrease in TDSR ratio. Bringing down the debt ratio means an applicant can apply for future loans if and when needed.