An increasing number of Indians opt for their own homes rather than renting. The availability of affordable house loan EMIs for an extended period makes it simple to obtain the home of one’s dreams. However, buying a house is a significant financial and personal decision with substantial financial implications. If not carefully picked, the monthly EMI and the long-term period to pay off debt can become a hardship.
This article will shed light on the best loan tenure for a borrower based on various factors, so keep reading.
Factors to Consider While Selecting the Right Home Loan Tenure
Some of the critical factors to consider before deciding on a loan term are listed below.
The applicant’s age is an essential factor in determining the loan term. Younger people can choose a long-term house loan with a lower EMI because they have many earning years ahead of them.
Additionally, most young people have recently entered the workforce field. Therefore, it is preferable to make their EMI low so that they do not default on any instalment. As their income grows, they can choose for partial loan prepayment, which reduces the loan amount and allows them to pay off their debt faster.
Long-term loans are not available to applicants in their mid-forties. The only way to obtain a substantial loan amount for such candidates is to pay a higher EMI. In this case, a mid-term loan with a period of up to 15 years or a short-term house loan is perfect. The EMI is more significant here, but you will be debt-free in a shorter time.
Furthermore, a shorter time results in a lesser interest payout. If possible, you should consider taking out a joint loan with your wife to benefit from lower interest rates. You must conduct research and attempt to obtain the best home loan interest rate in India accessible to match your needs.
- Your Income (Current and Future)
Unless you make a significant down payment, your house loan will be based on your monthly income. As we all know, obtaining a home loan is a long-term commitment. It would help to examine your savings, future earnings, and responsibilities before settling on the duration and EMI amount.
If you have fewer family financial obligations, you can choose a higher EMI. Otherwise, choose a low EMI for a comfortable ride. The high EMI amount ensures a short repayment period and minimal interest payments, allowing you to be debt-free in no time. However, it is risky because any financial crisis might lead to default, which is undesirable. So, while submitting home loan documents, choose at your discretion. You can also select a Flexi loan, which allows you to increase or decrease the loan amount.
- Interest Rate Charged
Another major factor that directly impacts loan tenure is the interest rate charged by the lender. The higher the interest burden, the higher the EMI, and the longer the tenure. Therefore, before beginning the home loan process with a specific lender, you must conduct thorough research and compare the rates provided by several lenders. Then, choose the one that best meets your needs.
Obtaining a home loan to buy your dream house is normal. However, before completing your home loan documents, you should decide the appropriate EMI amount and loan duration, so that debt repayment becomes a breeze for you.