How to Choose the Ideal Home Loan Tenure
Oct 26, 2017 Home Loan
Home loans have made it possible for a lot of potential home buyers to purchase their dream home. But most often the buyers get confused over the tenure of the loan and how their home loan installments will get affected. If you ask your relatives and friends for the same, they will give different answers depending upon their understanding.
We help you with the rundown of how the home loan tenure will affect your monthly installment:
Understanding home loan tenure:
The home loan tenure is the time period which the bank or any other financing institute give the home buyer to repay the entire loan taken to buy the home. Most of the banks offer the customised home loan tenure from 15 years to as long as 30 years. Few banks even offer the home loans for the time period for as short as 10 years but most of the banks refrain from providing such a short time period for the same as their profit margin is quite less in this case.
Impact on EMI and interest rate:
The home loan tenure helps in deciding your Equated Monthly Instalments (EMIs) as well as the interest you will be paying. The main thing to remember is that the banks compound the interest annually hence the interest amount will be longer for the long term home loan. However, the installments for 15 year tenure will be more than 30 year tenure.
For instance, let us consider the loan amount is Rs 50 lacs at the rate of 9 percent per annum, so how will this effect for the 15 year tenure and 30 year tenure.
For 15 year tenure,
• Loan EMI will be Rs 50,700
• Total interest will be Rs 41,28,399
• Total payment (i.e., principal + interest) will be Rs 91,28,399
For 30 year tenure,
• Loam EMI will be Rs 40,200
• Total interest will be Rs 94,83,207
• Total payment will be Rs 1,44,83,207
You can tell that increasing the home loan EMI by Rs 10,000 can bring down the home loan tenure by 15 years and also save you a lot of money heavy interest repayment. A 15 year margin can help you save up to Rs 50 Lacs.
The home loans are cheapest in India, and there are many avenues where investing the excess money can reap benefits. According to the current market conditions, the SIP of three years can help you earn up to 25 percent of returns annually. Though the mutual funds are subjected to market risks, the lowest interest rate is 12 percent which is higher than the interest rate you will be paying for your home loan.
Middle way:
The home buyer can take the home loan tenure for 30 years and work towards prepaying the loan at regular intervals assuming there is no pre payment penalty. The part payment can help you pay off interest amount which ultimately brings down the interest component in your installment.
We help you with the rundown of how the home loan tenure will affect your monthly installment:
Understanding home loan tenure:
The home loan tenure is the time period which the bank or any other financing institute give the home buyer to repay the entire loan taken to buy the home. Most of the banks offer the customised home loan tenure from 15 years to as long as 30 years. Few banks even offer the home loans for the time period for as short as 10 years but most of the banks refrain from providing such a short time period for the same as their profit margin is quite less in this case.
Impact on EMI and interest rate:
The home loan tenure helps in deciding your Equated Monthly Instalments (EMIs) as well as the interest you will be paying. The main thing to remember is that the banks compound the interest annually hence the interest amount will be longer for the long term home loan. However, the installments for 15 year tenure will be more than 30 year tenure.
For instance, let us consider the loan amount is Rs 50 lacs at the rate of 9 percent per annum, so how will this effect for the 15 year tenure and 30 year tenure.
For 15 year tenure,
• Loan EMI will be Rs 50,700
• Total interest will be Rs 41,28,399
• Total payment (i.e., principal + interest) will be Rs 91,28,399
For 30 year tenure,
• Loam EMI will be Rs 40,200
• Total interest will be Rs 94,83,207
• Total payment will be Rs 1,44,83,207
You can tell that increasing the home loan EMI by Rs 10,000 can bring down the home loan tenure by 15 years and also save you a lot of money heavy interest repayment. A 15 year margin can help you save up to Rs 50 Lacs.
The home loans are cheapest in India, and there are many avenues where investing the excess money can reap benefits. According to the current market conditions, the SIP of three years can help you earn up to 25 percent of returns annually. Though the mutual funds are subjected to market risks, the lowest interest rate is 12 percent which is higher than the interest rate you will be paying for your home loan.
Middle way:
The home buyer can take the home loan tenure for 30 years and work towards prepaying the loan at regular intervals assuming there is no pre payment penalty. The part payment can help you pay off interest amount which ultimately brings down the interest component in your installment.
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