When you decide to take a home loan, there are a majority of factors that you keep in mind like the lender, interest rate and the EMI. There’s one more factor i.e. Home loan tenure.
One of the most basic understanding in home loans is that; Shorter the tenure, Higher would be the EMI and the loan would be repaid faster OR Longer the tenure, lower would be the EMI and the loan would take a longer time period to be paid off. The difference in both is that when you take a longer tenure, you pay a higher interest amount. To focus on what should be the ideal home tenure for you, focus on the below mentioned points;
- Affordability:
Repaying off a loan quickly is what you want to do. But do not forget that to repay off a loan quickly, the EMI value would be very high. That high amount must be affordable as per your earnings. If it is affordable then you can go ahead with it. If not, then it is advisable to bring down the EMI amount and increase the tenure. A home loan must never come between you and your financial goals in life.
- Loan Requirement:
Your income is what helps the bank decide how much to lend you. Hence when you go to the bank with a home loan requirement of 50 lakhs, they will compute your salary and estimate how much they can lend you for 10-15-20-30 years etc. Accordingly you will get the loan. Hence you don’t always get to decide how many years are enough to repay a loan.
- Age factor:
It is said that it’s best to take a home loan in the initial stages of your career. You would never want to take a loan when you are closer to retirement as it will be tough to pay back the loan. Also while taking a loan, it’s best to find out if this loan will surpass your retirement age or no. If not, then you are safe. If yes, then you need to reduce the tenure.
- Tax Benefits:
For everyone with a home loan, there are tax benefits provided every year. Under the income tax act, there are few sections like Section 80c and section24 that give exemptions until a certain amount every year. Also, few companies offer annual bonuses. You can use them to partly pay the loan amount. This helps in reducing the overall EMI pending and can reduce the burden on you.
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