How To Choose The Right Tenure For Your Home Loan?
A house is one of the most pricey purchases in life. Though having your own house is still a big deal, long gone are the days when people slogged and saved all their lives and then bought a house. Thanks to the easy availability of home loans, buying a house is now a much more attainable dream. You can borrow a home loan from a bank or a financial firm like Piramal Finance. Different home loan types are available for you to choose from based on your requirements. However, the real twist is deciding the right home loan tenure. Tenure refers to the number of years in which you would have to return the loan amount to the institution in the form of EMIs.
Factors to Consider When Choosing the Right Tenure For Your Home Loan
Choosing the right tenure for your home loan can be confusing. To help you out, here are the top three factors that you should consider:
- Age of the borrower
- Overall interest rate
- Your income
For How Long Should You Take a Home Loan?
After considering the factors mentioned above, let’s understand through an example. So, suppose you are a 30-year-old male borrower with an income of INR 1 lakh per month, and you are looking forward to getting a home loan of INR 20 lakh. So, let us see how your chosen tenure will affect the EMIs you will have to pay.
| Loan Amount | Rate of Interest | Tenure | Monthly EMI |
|---|---|---|---|
| 20 lakhs | 11% | 10 years | INR 27,550 |
| 20 lakhs | 11% | 15 years | INR 22,732 |
| 20 lakhs | 11% | 20 years | INR 20,644 |
| 20 lakhs | 11% | 25 years | INR 19,602 |
| 20 lakhs | 11% | 30 years | INR 19,046 |
5 Tips to Reduce Rate
Other than the loan tenure, other aspects can help you get the best possible deal when planning to take a home loan. Let us take a look at some golden rules that you must keep in mind:
- Make frequent prepayments
- Research
- Choose the shortest possible tenure
- Higher Down Payment
- Increase EMIs when possible
What is the Best Home Loan Tenure?
Sadly, there is no perfect answer to this question. For different individuals, there could be different suitable tenures. Therefore, the tenure you choose has to suit your requirements the most. However, you must remember that the home loan interest rate or the EMI does not affect other life expenses too much. As discussed above, if you can pay higher EMIs, you can choose a shorter tenure, but if you are looking for affordable EMIs, you can opt for a longer tenure. Use a home loan EMI calculator to clearly understand the interest rate and EMIs.