The home loan tenure is a very important factor in the loan process. It can be the reason of your relief turn into a cause of worry. The cost of your home loan will directly influence the cost of your property. So you have to make sure it doesn’t end up being too high! Now you might wonder, what is the ideal home loan tenure? Will a short term home loan be good, or will a longer one work better for you?
We at Regrob will try to answer this question of yours by explaining the factors which influence your overall cost, because we want you to make the best decision. So here we go.
Factor 1- Present and future expected income
How do you pay out your home loan? Of course, by your income and that is why it is the first factor to be considered while deciding the home loan tenure. It will define your ability to pay the EMIs, and EMIs are directly related to the term of your loan. If you go for a long term loan, it will have a higher amount of interest, so the overall money payout through the tenure of loan is higher. However, if you have a good high income at present and can afford the high EMIs, then we suggest you to take a short term loan. The total interest payout over the tenure of loan will be less, which means that, more money saved! In the same way, if your income is low, go for long home loan tenure, so that the monthly burden is lower. Click here to read about Planning to get home loan according to your income.
Factor 2- Age
Since banks offer loans only up to your age of retirement, it is an unavoidable factor! You have to consider it to decide whether to go for a short term loan or a long term loan. If you are a young person and have lots of years to earn money, then you have the luxury of choosing a long term loan or short term loan. You can do as you please. However, if you are in your middle age and don’t have as many earning years left, then you have to go for a shorter duration on your home loan tenure.
Factor 3- Rate of interest on Home Loan
The rate of interest on your home loan is undoubtedly one of the most crucial factors which will help you decide whether to go for a long term home loan or short term home loan tenure. You have to see whether the rate of interest is fixed or floating. The name makes it amply clear. A fixed rate means the rate of interest on the loan is pre decided and will remain constant throughout the term of the loan. Whereas a floating rate of interest means it is subject to changes with respect to change in market conditions. Assuming all other factors remain constant, a lower rate of interest is identified with a short term home loan.
Factor 4- EMI outflow on Home Loan
Oh, the EMIs. How can we not mention this? People aim on keeping their EMIs low, as low as possible. This translates into a longer duration of home loan. A higher EMI means a shorter duration. But higher EMIs scare people off easily and they end up concluding that a long term home loan will be more beneficial to them. However, it is not necessarily true. When combined with all the other factors, more often than not, it is advisable to pay a higher EMI on a short term loan than pay a lower EMI on a long term loan. The main thing is to strike a perfect balance that suits your needs best, even if it has a slightly higher EMI. Click here to read about Bank of Baroda home loan
So please make sure you consider each and every factor before you make a decision. Ideal home loan tenure is different for different people, so there is no standard rule here. We have provided you a comprehensive list of factors and various scenarios for you to consider and get the best out of your home loan deal.
In a nutshell, if you want to pay off your loan quickly and pay less interest, you can choose a short term home loan. But if you have a stable income and want to pay lower EMIs, and then you can go for long term home loan tenure. The loan should not eat out on too much of your income and be such that you manage to pay it off easily. Plan your home loan in such a way that it does not interfere with your financial goals in life. Also, the home loan tenure should not be so long as to keep you chained for a large part of your life. Sometimes even a higher EMI is not as painful as the total amount that piles up as interest. But you are the best judge of that.
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