There are many factors which you have to look into while buying a home loan and one of the most important factors is to choose the housing loan tenure while applying for a home loan. A housing loan tenure can be defined as the duration from the date of disbursement of loan to the date of the last EMI payment date of closure of loan.
While you are assessing various parameters like housing loan amount and the rate of interest rate, you home loan tenure should be considered as an important variable as it determines your monthly EMI.
Things to consider before choosing your Home Loan tenure -
The housing loan tenure varies depending on your age, housing loan amount and the repayment capacity. Usually, the tenure is for 10, 15, 20 and 30 years, but there is a room for debate when it comes to choosing a short-term tenure or a long-term tenure.
There are many myths floating around in regards to the tenure. However, it is wise to calculate and assess your current monthly income, project a practical hike in your annual CTC and then on that basis decide you may arrive at a tenure which will help in giving the affordable EMI outflow after the repayment begins.
Always remember that with shorter the tenure your EMI rises but the home loan gets repaid faster. In case of longer tenure, your EMI is less but it takes longer to repay the loan. In a shorter loan tenure, you pay less in terms of absolute interest cost and in the longer loan tenure, you pay more in terms of absolute interest cost.
In many cases it has been observed that some home buyers wish to get rid of the burden of home loan at the earliest. They ambitiously opt for a short-term tenure and end up paying a high EMI. Fathoming the fact that an EMI can eat up a huge chunk of your salary, there is a risk involved in taking a short-term home loan because if interest rates rise in future, you might have to pay a higher amount of EMI as compared to the one you had contemplated before.