How to Pick the Ideal Home Loan Tenure ?
Buying a house is a very important financial decision in your life. Earlier, people used to save money for years and then thought of buying a house. But now, if you are earning a steady income, you may buy a home with an easy housing loan process. With a home loan, you can not only own a house of your choice but also create an asset after you’ve paid it off during the home loan tenure.
Buying a home at an early age with home loans online is a wise decision. In recent years, we have witnessed a gradual rise in the price of real estate properties, despite the COVID-19 pandemic. If you delay buying a property in the near future, it may turn out to be very expensive. Hence, creating a long-term asset at an early age with home loans for 1bhk is very beneficial.
A home loan is taken by a borrower for purchasing/construction/renovation of a property from banks and housing finance companies at a specified rate of interest. To get a loan, your financial profile should be eligible and have the necessary documents. It is sanctioned to only those borrowers that qualify the parameters such as steady and regular monthly income, good credit score, age factor, credibility factors, etc. However, borrowers need to be extra careful when picking the home loan tenure, as it will be a long-term commitment.
Let’s look at factors affecting tenure and how to choose a suitable house loan tenure.
What Factors Affect the Home Loan Tenure
A borrower takes a home loan for a specified period that is known as home loan tenure. The question is how long the tenure should be.
Age
The maximum tenure for home loan online repayment is 30 years. Another important factor that affects the home loan tenure is your retirement age. For a self-employed individual, the maximum tenure is 30 years or up to 60-65 years of age. Many banks and housing finance companies allow borrowers to pre-pay and change the housing loan tenure with an increase in income.
Current income
After considering your monthly income and expenditures, you can calculate an estimate of your disposable income. Your EMI should not be more than 50% of your in-hand salary. Before giving a thought about repayment, you must understand that EMIs and home loan tenure have an inverse relationship. The lower the EMI, longer would be the tenure of home loan. In contrast, the higher the EMI, shorter would be the home loan tenure. You can get an idea about home loan amount and tenure by using the home loan EMI calculator.
Cost of borrowing
A lower EMI for up to 30 years looks affordable for a borrower, but it increases the cost of borrowing. That’s why home finance lenders prefer to offer home loans online for longer tenures.
Total loan amount
The total loan amount borrowed plays a vital role in determining the tenure for home loans Mumbai. If you have borrowed a large amount, it is affordable for a borrower to opt for a longer tenure. But if you have taken a home loan for a small amount, you must opt for a smaller tenure to reduce the cost of borrowing.
Determining an Ideal Home Loan Tenure
There is no standard set for an ideal tenure of a home loan. It depends upon some factors such as the lifestyle of a borrower, financial status, preferences, and other goals in life. Some borrowers prefer to repay loans as quickly as possible, so they opt for higher EMIs. Some prefer to maintain liquidity, so they opt for longer tenures.
To make the right choice, financial planning is essential. With effective financial planning, you can save and repay your longer-tenure home loans quickly. By making smaller pre-payments, you can quickly get rid of debt. To leverage the advantages of home loans in Mumbai, you should ideally buy a house at the age of 28 years and take a home loan for 30 years. This way, you can get a higher loan amount. As your income increases, you can easily pre-pay or even take top-up loans.
Golden Rules to Follow for Ideal Home Loan Tenure
Keep your EMIs up to 50% of your in-hand salary
Before deciding upon the loan amount and home loan tenure, you must be aware of your monthly expenses and liabilities. Your net disposable income plays an important role in determining your repayment capacity. If your spouse is working and drawing an equivalent salary, you may increase your EMI burden. With an increase in salary in the future, your burden also reduces. You should always consider the ideal scenario of having an EMI of not more than 50% of the net take-home salary.
Pre-pay home loans regularly
Even if you have a longer home loan tenure, you can reduce the cost of borrowing and tenure by making regular pre-payments. Ideally, when you receive any bonus or maturity amount from an investment, you should make a pre-payment of 75% of that amount.
The crux is that you should not stress on your finances to reduce the cost of borrowing. Keep a tenure that allows you to balance your monthly expenses and EMIs. With regular savings, make smaller pre-payments to reduce the loan amount and cost of borrowing.
