How to Choose the Ideal Home Loan Tenure?

How to Choose the Ideal Home Loan Tenure?

 We all know the feeling of being a homeowner is one of the proudest moments in anyone’s life. However, purchasing a home in India is a difficult task especially when inflation is at an all-time high. The government and financial institutions have several home loan options to make the purchase of a home affordable and simple. Some financial professionals advise home buyers to choose a longer kotak mahindra bank home loan tenure to take advantage of the low EMI and tax benefits. However, is it really worth it? Should you really go for longer tenure? What are the ideal and maximum home loan terms to go for? In this article, we are going to discuss the ideal home loan tenor to choose from.

What Is Home Loan Tenure?

The amount of time you have to repay your total SBI Home Loan, including interest, is referred to as the home loan tenure. A home loan can now be either long-term or short-term. The maximum home loan term is decided by the applicant’s retirement age, though there are other factors that lenders consider before finalising the loan tenure.

A kotak mahindra bank home loan allows you to realise your dream of owning your own home. However, loan application and receiving a home loan is a time-consuming process that involves numerous steps and formalities. One of the most important factors to consider is the term of the SBI Home Loan that most people overlook when selecting a home loan. One must understand that home loan tenure directly impacts the cost of borrowing which ultimately increases the cost of the property. Kotak Mahindra bank home loan terms typically range between 15 and 30 years. In many cases, homebuyers prefer a longer term to a shorter one. Both options have advantages and disadvantages, and it is entirely up to individuals to choose the tenure that is best for them.

Factors Influencing The Length Of Your Home Loan

To improve your credit rating and eligibility, financial experts recommend that you pay off all other debts before applying for a SBI Home Loan. Here are the important factors that influence the home loan tenure you will ultimately choose.

Current income: Calculate your current income and expenses to calculate your monthly savings or net disposable income. According to financial experts, your SBI Home Loan EMI should not exceed 50% of your salary (the net take home pay amount). Also, keep in mind that the EMI and the loan tenure have an inverse relationship. If you choose a lower EMI, the loan’s tenure will be extended accordingly. Depending on your income, you can choose a loan term of 15 or 30 years. A longer term will lower your EMI and allow you to keep up your current lifestyle without any burden. However, many banks and lending institutions allow you to change the term of your SBI Home Loan. You can prepay your loan and shorten its term as your income and savings grow.

Interest rates on home loans: Banks and housing finance companies typically offer lower interest rates on home loans. For the same, you must decide whether you have the financial resources and liquidity to repay a home loan over a shorter period of time. If that’s a viable option, it makes sense to go for a shorter term and get the benefits of a lower interest rate.

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Life stage: Your financial responsibilities change as you progress through life, and this is an important factor to consider when deciding on a home loan tenure. If you intend to settle down and start a family, your monthly expenses will usually increase. In such a case, it is preferable to choose a 30-year term and a lower EMI to take care of the family expenses. If you are only a few years away from retirement, you can choose a kotak mahindra bank home loan tenure with a shorter repayment period so that your loan is paid off by the time you retire.

Total amount borrowed as a home loan: The total amount borrowed as a home loan also plays an important role in determining tenure. If you have borrowed a significant amount, a longer term is preferable to a shorter one. This will give you more time to repay the loan while repaying a less EMI.

Borrowing cost: A 30-year home loan tenure may have a lower EMI, but at the end, it will increase the cost of borrowing. Banks and housing financial institutions usually recommend longer home loan terms. However, the truth is that lenders benefit financially from longer loan terms. While it’s common to believe that a lower EMI means a lower cost of borrowing and a lighter burden on the wallet, a 30-year home loan tenure actually costs more in interest than a 15-year one. This raises the cost of your property, resulting in a lower return on investment.

So We Are Saying, 

As there is no prepayment penalty, you can enjoy the benefits of a 30-year term while working towards prepaying the loan in 15 years through regular partial payments. With the help of partial repayment, the principal and the interest amount will reduce. Financial experts recommend that you use up to 75% of any upfront amount received, such as an annual bonus or investment maturity amount, to prepay your home loan.

By taking these small steps, you can reduce your liabilities and get out of home loan debt as soon as possible. Choosing a tenure for your home loan is difficult because you must consider all of the possible scenarios that you may face while repaying it such as marriage, the child’s education, family vacation, etc. At the same time, it is also recommended that you don’t stretch your finances unnecessarily to shorten the home loan tenure at the expense of your family’s needs and comforts. With the aforementioned steps, you will be able to strike a balance between your monthly EMI obligations and the loan tenure.