Home Loan Tenure

Home loan tenure is the period in which the loan amount is to be repaid.  This may vary from bank to bank depending on their terms and conditions.  The home loan tenure depends on the loan amount also.

The period of home loan implies the period of repayment that is to be made by the borrower.  If the loan tenure is of a larger period, the total cost of the loan increases.  Similarly, if the home loan tenure is of a lesser period, the total cost of the loan reduces.

I suppose you wanted to buy a house of cost Rs. 40 lakhs, you will need a loan amount of around Rs. 30 lakhs.  So, you will approach a bank and apply for a loan of amount Rs. 30 lakhs.

After verification of the required documents and your background, the bank would decide on the availability of different sets of EMIs and loan tenures.

Now it is your choice to choose on a beneficial package.  If you choose one with the least EMI, the loan tenure would become more.

If you choose a set with the highest equated monthly installment, though the home loan tenure would be less, you will still be liable for a higher EMI amount.

So, it is wiser to choose on a plan where the equated monthly installment and the home loan tenure are the most favorable to you.

If the interest on those Rs. 30 lakhs are around Rs. 25 lakhs, your total cost of house would be an amount of Rs. 65 lakhs (cost of Rs. 40 lakhs and interest of Rs. 25 lakhs).  That means the interest sum also falls under the cost of the house.

If your home loan tenure is longer, there are chances that the interest cost might also get higher.  So, it is important to decide on the equated monthly installment amount and the home loan tenure carefully.

If the cost of the property becomes higher, the Return on Income from the property is brought down in value.

But, there are also few benefits in this.  This interest amount that would be charged as your cost can be claimed as a deduction for the purposes of Income Tax.

You should have a great planning regarding the loan tenure you wish to take.  There are few factors on which your  loan tenure should be dependent:

Loan amount

The amount of home loan helps in deciding on the loan tenure for an individual. The higher home loan amount may give a way to a higher home loan tenure.  The lesser home loan amount helps in having a lesser home loan tenure.

The loan amount has to be carefully decided and should be taken only on the amount that is really required as a loan.

The loan amount helps an individual in determining whether they should go on with a higher home loan tenure or a lesser loan tenure.

EMI

Equated monthly installment on a home loan is the Equal Monthly Instalment that has to be paid on monthly basis by the individual. This EMI helps us in reducing our burden of heavy payments.

It is the combination of a part of principal and an amount of interest.

It depends on the home loan amount and the interest rate.  The interest rate varies depending on the home loan amount.

Thus, the home loan tenure plays a rather important role in deciding on the amount of equated monthly installment.

There may be many options for you to choose on for the amount of the equated monthly installment and the loan tenure.

The plan with the higher EMI amount can have a lesser tenure, but it would become a burden if you choose that plan.

If you have a plan with a lesser EMI amount, the home loan tenure becomes a long term.  This would again increase the amount of interest.

So, it is important to carefully choose on a plan with favorable and good equated monthly installment.

Interest rate

The interest depends and also influences the home loan tenure of a loan. The larger home loan tenure might have a larger interest rate and the lesser loan tenure might have a lesser interest rate.

The choice of interest can be made by choosing a plan with favorable home loan tenure.  The plan has to be made accordingly.  The influence of the loan amount can be of lesser importance in case the loan tenure falls in line.

The problem of having a higher interest rate is that it would again increase our total cost.  The higher interest rate would give out a way to a higher interest amount and that would further increase the total cost of the house.

Choice of the individual

The loan tenure can be left to the choice of the individual that is to be made personally after considering all the available factors that influence the home loan tenure.

Proper guidance can also be used in this case, so as to decide on a perfect home loan tenure for the individual.

Based on the future requirements also, a loan tenure can be fixed.

Proper planning

Proper planning is important in deciding on a loan tenure. The tenure is to be decided after considering other responsibilities such as children’s education or marriage.

These events need a huge amount of investment.  Hence, it is to be planned such that these obligations do no fall as a huge burden along with the home loan amount.

The home loan tenures may vary starting from a period of 10 years.  It is to be decided by the individual to choose on a tenure after considering all the other requirements.

According to different surveys, a period of 10 years is given the most preference by the people.  This is because the burden is set off in just 10 years and they can again start investing elsewhere.

The period slab of 10 to 25 years is given the next preference in fixing the loan tenure.

Through this survey, it is evident that people are interested in choosing on a tenure that is of the least period of time.