3 Factors that can Help you Decide Home Loan Tenor

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A decision to buy a home of your dream is made once in a lifetime, and hence one needs to consider many factors when it comes to using a home loan to fund it. These could be your age, income, awareness of RBI home loan interest rate, home loan tenor and beyond.

Thus, if you are concerned about choosing a short-term or a long-term home loan tenor so that it is affordable to manage, this post will shed some useful insights on it.

3 Factors that Decide your Home Loan Tenor

1. Your Age: – When it comes to selecting the right home loan tenor, age is not just a number as it can greatly influence that decides the tenor of the housing loan that you plan to take. Lenders will assess your age while letting you get the best tenure for home loan. The older you are (less working years left, and more chances of loan defaulting), the lesser will be your home loan duration. Young professionals are more likely to get a longer tenor because of the sole reason that they have more working years left and, their loan defaulting chance is less. If you are in your 50s or 60s, you will be left with no alternatives but to go for a smaller loan duration. If you want to avail a higher home loan duration, you can apply for a home loan jointly along with your child. Like this, you can easily spread the home loan repayment duration and pay smaller EMIs.

2. Home Loan Interest Rate: – Since you pay a credit cost to the lender in the form of the home loan interest rate, even this can affect your home loan tenor. Higher is your home loan rates, greater will be your credit costa and vice-versa. You will keep paying the interest based cost to your lender until the end of the tenor. Ensure using the home loan EMI calculators to exactly know your home loan EMI even before the application and make arrangements. Like this, you will be able to budget your expenses as you will also need to consider extra costs at the time of loan application

3. Your Income: – The concept is simple to understand when it comes to your income – the higher it is the shorter home loan tenor you can opt for if you don’t have other ongoing debts. It is because your higher income will take care of the burden of paying a higher EMI. Just when you decide to opt for a shorter home loan tenor, ensure that you don’t sacrifice or need to cut down on other expenses. Also, ensure that you have ample savings to meet any emergency. With this it is always required that you should have a maintained credit score to apply for a home loan. A guide about how much cibil score required for home loan will help you to better understand the concept. However, if you don’t have a higher income, have other obligations, don’t have savings to meet urgencies and maintained cibil score, you can opt for a longer home loan tenor. A longer home loan tenor will help you spread the loan cost and help you pay smaller EMIs which in turn will let you have enough to make way for anything urgent.

How to Decide whether to go for a Shorter or Longer Home Loan Tenor?

Some people don’t want to keep a home loan obligation for long as its repayments influence their monthly income for long and keep them off completing other goals. As a result, they opt for a short-term and repay off the loan by putting in higher EMI. Usually, those types of loan borrowers are higher earners and don’t have issues when it comes to funds to deal with unexpected emergencies.

On the other hand, since it’s a known thing that putting in a higher EMI will eat a considerable portion of their monthly income, some people opt for a longer EMI. Even when their salary go up or they receive some bonus, they like to make extra EMIs and prepayments to cut down on the interest and number of repayment months. Like this, they keep things under their control.

Now that you are aware of the factors and other aspects of deciding for a shorter or longer home loan tenor, you can make a decision comfortably now.

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