Summary of the Key News Points in Plain Language
Recently, there was a major new housing loan policy introduced by the regulatory authorities: the maximum loan term for personal housing loans has been extended from the previous 30 years to 40 years. This news spread rapidly online, with claims such as “you could be paying off the loan until you’re 80 years old” and “all existing loans can be extended to 40 years, reducing the monthly payment by half.” However, reporters from Cailian联社 contacted the credit departments of state-owned banks, joint-stock banks, and city commercial banks to find out the actual situation. The benefits were far from what people had imagined. The vast majority of banks have no intention of relaxing the age restrictions for loans. The number of people who actively inquire about 40-year loans is much lower than those who want to extend existing loans. The so-called “loan relief” is not a unconditional reduction in monthly payments for everyone. The policy is more like the regulatory authorities setting a upper limit, and the banks are implementing it according to their own risk assessment.
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Detailed Analysis of Hot Issues
1. The claim that loan terms can be extended to 80 years is unattainable for 99% of people
The unofficial rule for loan terms was that the sum of the borrower’s age and the loan term could not exceed a certain number. State-owned banks generally required that the total not exceed 75 years, while city commercial banks were even stricter, often limiting it to 68 years. For example, if you buy a house at 50 years old, you could only get a loan for 25 years. The new policy only increases the maximum loan term from 30 to 40 years; there is no relaxation of the age restrictions. Banks are very clear about this:
- State-owned banks have only internally discussed whether to raise the upper limit from 75 to 80 years, but even if it were changed, most banks would still require the borrower’s age not to exceed 70 years. If you buy a house at 30 and get a 40-year loan, you would only be paying it off by the time you’re 70, so you wouldn’t benefit from the extended term.
- Smaller banks have explicitly stated that they will not follow the age relaxation. In fact, people over 60 years old who do not have children as co-borrowers will not even be able to apply for a loan.
2. A 40-year loan may seem like a cheaper monthly payment, but most people won’t benefit from it
Mathematically, a 1 million yuan loan at a 4% interest rate would have a monthly payment of 4,774 yuan for 30 years and 3,796 yuan for 40 years, a savings of nearly 1,000 yuan per month. However, banks predict that very few new customers will actually choose the 40-year option:
- People generally don’t want to owe money to banks, and the trend of early loan repayments from the past two years has not subsided. Many with extra money prefer to pay off their loans quickly rather than pay extra interest for 10 years.
- Most people buy houses in their twenties or thirties, and a 40-year loan would only be paid off by the time they’re 70 years old, which is exactly the age limit set by banks. If you buy a house after 35, you would have to pay it off by the age of 75, which is still not allowed under the current regulations.
- The number of inquiries about 40-year loans is less than half of those about extending existing loans.
3. Extending existing loans to 40 years to reduce monthly payments is more difficult than you think
Many people who have already taken out 30-year loans and have paid for five to six years hope to extend the term to reduce their payments. However, the regulation does not require banks to do this; it’s up to the banks to decide. There are also hidden requirements: only those who have lost their jobs or had family members fall ill and temporarily lost income would be eligible for an extension. Even if you meet the criteria, older borrowers can only get an extension of three to five years, not the entire loan term.
- This relief policy is essentially a continuation of the measures taken during the pandemic to help those in temporary difficulty, not a universal benefit that reduces monthly payments for everyone.
4. Banks are cautious about implementing the new policy
The new policy is being implemented slowly because the regulatory and banking interests differ. The regulators want to boost the housing market and reduce the pressure on residents, so they have raised the maximum loan term. Banks, however, are wary of taking on bad debts. With fewer people repaying loans early, they want to lend to more reliable borrowers to earn interest but are afraid of losing their investments. Therefore, the policy sets a loose upper limit, and each bank decides how strictly to apply it, rejecting higher-risk applicants.
5. Only three groups of people will truly benefit from the new policy
Most people should not be misled by the hype online. The real beneficiaries are:
- Young people just starting their careers with little savings; they can now get a 40-year loan, reducing their monthly payments significantly and meeting the bank’s age requirements.
- People who have temporarily lost income; they can negotiate a 1-2-year extension to repay the principal, giving them some time to catch up.
- People in their fifties who want to upgrade their homes; they can get a longer loan term and lower monthly payments if the age restrictions are slightly relaxed.
- For the majority of people, the new policy has little impact on their lives.