Home Loan Tenure: 10 vs 20 vs 25 year Loan — How home loan interest rate impacts EMI and total housing loan repayment | EXPLAINED

For most homebuyers, the biggest dilemma after loan approval is not about the property, but about the tenure. Should you stretch the loan to keep the EMI light or finish it quickly and save on interest? Financial planners often say the answer depends less on mathematics and more on cash flow discipline.

Let’s break it down with a simple example:

Assume you take a home loan of Rs 2 crore at an interest rate of around 8.5 per cent per annum. The tenure you choose changes the total amount you eventually repay.

If you opt for a 20-year loan, the total interest paid over the period works out to roughly Rs 2.15 crore. That means your total repayment crosses Rs 4.15 crore.

Extend the same loan to 25 years and the interest jumps to nearly Rs 2.86 crore. Your total outgo rises to about Rs 4.86 crore.

Now compare this with a 10-year tenure. The total interest payable drops sharply to around Rs 0.98 crore. Your overall repayment stays close to Rs 2.98 crore.

The gap is significant. Between a 10-year and 25-year loan, the difference in interest alone is close to Rs 1.9 crore. That is the price of stretching comfort over time.

But does that mean everyone should choose a shorter tenure? Not necessarily.

In metro cities like Mumbai, where property prices are steep and lifestyles are expensive, liquidity matters. A longer tenure reduces the EMI burden substantially, leaving room for investments, children’s education, insurance premiums and emergency savings. It also gives breathing space in the early years of a career when income may not be at its peak.

Experts usually suggest a practical middle path. Start with a longer tenure, say 20 to 25 years, so that your EMI remains manageable. As your salary rises through increments, bonuses or job switches, channel surplus income into prepayments. Even small lump sum repayments made regularly can bring down the principal and cut years off the loan.

Another structure that borrowers increasingly explore is the overdraft-linked home loan. In this format, any surplus money parked in the loan account reduces the principal on which interest is calculated. The funds remain accessible, but interest is charged only on the net outstanding amount.

The real decision, therefore, is not simply about tenure. It is about balancing liquidity today with savings tomorrow. A longer loan offers flexibility, while a shorter one offers peace of mind. The smartest borrowers often combine both approaches, keep the EMI comfortable at the start and repay aggressively once income becomes stronger and financial commitments stabilise.

PremiumUpdated Feb 24, 2026 03:27 PM IST

EXCLUSIVE | AI disruption vs Earnings revival: 'FY27 should be better...' - BIG market call by Bandhan AMC's Manish Gunwani

Earnings revival: Manish Gunwani, CIO, Equity at Bandhan AMC, breaks down the impact of AI disruption, rupee depreciation, IT services and platform companies. Indian stock market indices Sensex and Nifty 50 traded lower on Tuesday, February 24. The Nifty 50 hit an intraday low of 25,460, falling nearly 1 per cent, and the Sensex also fell 1.6 per cent to trade lower at 82,410.99 at the intraday level.