15 year or 30 year home loan? Know impact on EMI, interest before choosing tenure

 For most tenants who pay rent to their landlord, moving into their own home is a dream come true. Financing a home is gaining popularity among many tenants, with home loan interest rates at a multi-year low of approximately 7%. After saving a few lakhs for a down payment, all you have to do now is contact a bank or a housing finance company (HFC) to purchase your own property.

Most lenders will supply you with a home loan that is roughly 50% of your monthly take-home salary. You can also show your spouse's salary to boost your eligibility. Most lenders will base your interest rate on your career, income, gender, credit score, and other factors. Another thing you should consider is the loan's duration. Many banks offer home loans with terms of up to 30 years. But, should you choose for a 15-year or 30-year contract? Let's have a look.

The EMI will be cheaper the longer the term you choose. A smaller EMI appears to be easier to service without having a negative impact on the household budget. The majority of tenants will want the EMI to be as similar as possible to the rent they are presently paying to their landlord. However, if a person intends to pay off a home loan in a few years, the EMI will be greater for the same loan amount. For example, on a home loan of Rs 35 lakh at 7% interest, the 15-year EMI will be Rs 31,459, whereas the 30-year EMI will be Rs 23,286, a difference of roughly 26%.

Loan Amount: Rs 35 lakh

EMI – 15 Years: Rs 31459

EMI – 30 Years: Rs 23286

Interest paid: Rs 21.62 lakh ( Over 15 – years)

Interest paid: Rs 49 lakh ( Over 30 – years)

Saving in EMI by opting for 30-year tenure : Rs 8173 ( Annual savings of approx Rs 1 lakh)

Saving in Interest by opting for 15-year: Rs 27 lakh ( Annual savings of approx Rs 1 lakh)

Difference in Interest Paid

The overall interest you will pay out of your EMI will be determined by the term you choose. The bigger the interest load, the longer the term you choose. Over 15 years, the total interest on a Rs 35 lakh loan will be roughly Rs 21.62 lakh, while over 30 years, it will be nearly Rs 49 lakh. The entire interest expense on a Rs 35 lakh home loan will be about Rs 49 lakh!

So, before you commit to a 15-year, 20-year, or 30-year house loan, consider the elements that may affect your EMI and interest costs. A total cost of ownership calculator can assist you in determining the best home financing choice for you.

What to do

The EMI will remain the same until the loan is paid off, and servicing it may become easier if income increases over time. Choose your tenure wisely. The EMI savings might also be invested if there is an investible surplus. However, the goal should be to repay the debt as soon as possible in order to keep the interest rate low. While a longer term lowers the EMI, the interest expense is enormous. If you must choose it, keep prepaying the loan at regular intervals by making a balloon or lump sum payment. This will allow you to finish the debt as soon as feasible.

Conclusion

There's no need to be discouraged if your personal loan application is turned down. To boost your chances of loan approval, simply work on improving your credit report and following the methods outlined above. Once you've completed this checklist, you're ready to submit your personal loan application.To find about the best pricing and deals, call our toll-free number +91-9477079053. They'll help you in every way they can. Please contact me at Best Home Loan In India if you have any more.

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