If you are planning to buy your own home, then there are various things you need to take into consideration. And since purchasing your own home is a high-ticket transaction, it must be planned very carefully. Housing finance is the most critical thing you need to assess while purchasing a home.
While there are various factors to consider and negotiate, your money outflow can have a significant impact. Thus, the tenure of your home loan, in the long run, is to be taken into consideration. But have you ever thought about why it is important to negotiate your home loan tenure?
Today, in this article, you will find out the factors that impact your home loan tenure. And while you understand them better, you can become efficient in choosing the correct tenure for your home loan. Let’s get started.
What Factors Should You Consider While Choosing the Right Tenure for Your Home Loan?
Initially, choosing the appropriate tenure for your home loan can be confusing and intimidating. However, considering certain factors can efficiently help you in determining the same.
- Borrower’s Age
For banks and financial institutions, age is considered an important factor. It is because, with a long steady income flow, your chances of repaying loans become higher. And if you are approaching your retirement, you can select a shorter tenure. This gives you the confidence to pay back your outstanding loans before retiring.
- Borrower’s Annual Income
Since your income decides your repayment eligibility, it plays a pivotal role in determining your home loan tenure. If you can pay higher EMIs, you can easily choose a shorter tenure. You can use a home loan EMI calculator in India to calculate the loan amount required to pay.
But if you wish to pay a lower EMI, you can choose longer tenures. Nevertheless, your overall interest rate goes significantly higher, and you can pay off your loans in a more significant duration.
- Overall Interest Rate
The home loan interest rates and tenure share an incredibly deep and vivid connection. As the interest rates are applicable yearly, you need to pay more interest with a longer tenure. And when your loan tenure gets over, you will figure out that you’ve paid a hefty amount as interest.
How Can You Reduce Your Home Loan Rate?
Whenever it comes to obtaining a home loan, the rate is equally important, just like tenure. And to get your home loan in the best possible deal, you must:
Do your homework and research extensively to check out the competitive rates. Only after that, you can choose to decide on the appropriate institution.
- Make Adequate Repayments
You can choose to repay your loan whenever you find out that you have surplus money and don’t have urgent requirements. This is undoubtedly a great idea as it efficiently reduces your principal amount and significantly cuts short the interest rates.
- Consider a Higher Down Payment
It is always important to choose a higher down payment. This helps in reducing your principal loan amount and significantly saves more on it.
- Opt for the Shortest Tenure
It is always best to choose the shortest tenure for a home loan. Thus, you are capable of paying the lowest possible overall interest rate.
Choose Increasing Your EMIs Whenever Possible
While your financial capability increases, you can consider increasing your EMI. This will significantly help in reducing the interest rate.
While there is no appropriate answer for the best home loan tenure, you need to determine your capabilities. Only then you will be able to determine the best tenure for your home loan.