What’s the best tenure for a home loan?

Home loan tenure is the time it takes to pay off your home loan. It is usually measured in years, and in Australia, standard home loan packages give you a timeframe of 30 years. The tenure is a big deal because it helps determine how much you’ll be shelling out monthly in repayments. If you keep extending your tenure, your monthly payment is lower, but in the end, it will usually cost you more. If you’re trying to determine what balance of cashflow and reduced interest is best for you, read on.

Key Factors To Consider While Deciding Home Loan Tenure

When you’re deciding how long to take to pay off your home loan, there are some real-life factors to consider:

  • Age: If you’re a spring chicken, you may want to go for a longer tenure because you’ve got time on your side. But if you’re getting close to the big 5-0, you’ll probably need to aim to clear your debt faster, before retirement kicks in.
  • Income: Your paycheck plays a big role here. Got a fat and steady income? Awesome, consider a shorter tenure with higher repayments and lower interest rates. If your cashflow isn’t that steady, a longer tenure might be your best bet to keep those repayments more affordable.
  • Expenses: Take a good look at your monthly bills. If they’re on the higher side, a longer tenure might help you juggle your mortgage and other expenses. But if you’re a budgeting pro and keep your spending in check, a shorter tenure might be the way to go.
  • Now, the burning question.


    How Does Home Loan Tenure Impact My Repayment Budget?

    Consider a home loan of $500,000 with an interest rate of 5%. The impact of different tenures on monthly payments and total repayment can be seen below.

    Total Repayments By Tenure

    Tenure Monthly Payment (approx.) Total Repayment Total Interest Paid
    30 Years $2,684 $966,440 $466,440
    25 Years $3,048 $914,358 $414,358
    20 Years $3,672 $881,260

    $381,260
    15 Years $4,297 $774,430 $274,430

    Suppose you opt for a 30-year loan tenure. As you can see, your monthly mortgage payments will be lower. This is because the total repayment is spread over 360 months (30 years). Despite the lower monthly payments, however, the total amount repaid over the life of the loan is higher. This is because the interest is accumulating over a longer period. In Australia, the interest paid each month is based on the remaining principal, and a significant portion of your initial payments goes towards interest.

    Now, let’s consider a 15-year loan tenure. With a shorter tenure, your monthly mortgage payments will be higher. This is because the total repayment is spread over only 180 months (15 years). Despite the higher monthly payments, however, the total amount repaid over the life of the loan is lower. This is because the loan is paid off sooner, and interest has less time to accumulate.

    Discover how small extra payments can shorten your mortgage and save you money with our trusted calculator. It is simple to use and it clearly demonstrates the power of additional contributions.

    Here’s the calculator.


    Paying Off Your Mortgage Early: Pros And Cons

    Also called prepayment or foreclosure, paying off your mortgage early can be advantageous in various ways, such as reducing interest costs and achieving financial freedom sooner. However, it’s essential to weigh the pros and cons carefully.

    The Sunny Side

    • Lower Monthly Payments: Temporarily extending your home loan can provide immediate relief, freeing up monthly cashflow to address immediate financial concerns.
    • Financial Flexibility: Reduced monthly payments offer a degree of financial flexibility. This enables sensible financial moves, like building an emergency fund, managing debts, and planning for the future, even if the impact is temporary.
    • Improved Cashflow Management: While the appeal of enhanced cashflow is apparent, responsible money management is the key. Wise spending, using budget tools, and making sound investment decisions are essential for avoiding financial pitfalls.
    • Facing Economic Realities: In the face of economic difficulties, such as inflation and rising interest rates, extending your loan may offer a short-term solution. However, it’s crucial that you recognise this as a temporary reprieve, as broader economic conditions remain beyond personal control.

    The Dark Side

    So, you’re considering stretching your home loan in Australia. There are a few things lurking in the shadows that you want to make sure you know about.

  • Watch Out For Rising Interest Payments: Extending your loan tenure may result in a significant increase in interest payments over time. Beyond mere numbers, understanding the substantial difference between opting for a shorter versus a more extended loan period is crucial. While the long-term financial implications may take time to surface, comprehending these consequences is wise.
  • Weight Of Extended Debt: This decision extends beyond financial considerations and can affect your emotional wellbeing. Anxiety, insecurity and a sense of financial constraint may arise. Insights from financial experts and real-life experiences underscore the potential emotional toll of extending debt. Additionally, consider the potential compounded stress if interest rates fluctuate in the future.
  • Future Goals Take A Hit: Viewing your extended loan as a potential obstacle to life goals is important. It’s crucial to acknowledge potential missed opportunities. Reflect on how this decision might impede your progress toward long-term aspirations before committing to an extended loan.

Which Is Better: Shorter Or Longer Mortgage Tenure?

Choosing between a shorter or longer mortgage tenure depends on individual circumstances and financial goals. Shorter tenures provide quicker debt repayment with lower overall interest costs, while longer tenures offer lower monthly payments, providing flexibility in managing monthly budgets. Our Home Loan Experts mortgage brokers have the hard-earned experience and expertise to help you make the right decision.

Expert Insights On Home Loan Tenure

Home Loan Experts Mortgage Broker Siddhartha Bajracharya provides valuable insights: “Consider the strategic approach of refinancing an $800,000 home loan with a current interest rate of 6.5% per annum. Transitioning from a 20-year term to a 30-year term results in a noteworthy reduction in monthly payments – from $5,965 to $5,057 – yielding a monthly savings of $908. This financial flexibility allows for allocating funds towards an offset account, additional repayments, or alternative investment avenues.”

It is essential to recognise that the act of refinancing triggers a reset of the loan term, extending the repayment duration and enhancing cashflow management. By also using features like offset accounts and redraw facilities, one can adhere to the original payment schedule while expediting the payoff of the home loan.


FAQs About Home Loan Tenure


The tenure for a home loan typically ranges from 25 to 30 years, depending on the lender and the borrower’s eligibility. However, tenures over 30 years may be available for specific loan products or under certain government schemes.


When choosing how long to take to pay off your home loan, consider factors like your financial goals, monthly income and risk tolerance. Shorter terms mean higher monthly payments but lower total interest, while longer terms result in lower monthly payments but potentially higher overall interest.


Generally, once your loan is approved, the tenure is fixed. However, some lenders may offer limited flexibility, especially if there’s a valid reason. It’s crucial to discuss such matters with your lender before finalising the loan agreement.


Choosing The Right Home Loan Tenure – We Can Help!

Discovering the right home loan tenure involves carefully assessing your financial situation, goals and risk tolerance. Our expert team is ready to support you in making an informed decision that seamlessly aligns with your long-term vision.

To experience a mortgage process infused with care and expertise by one of our Home Loan Experts, reach out to us at 1300 889 743 or enquire online.