In an ideal world, homebuyers opt to take a home loan to either build or buy a property of their own. In the process of approaching banks for a home loan, they come across various factors to gain the eligibility to acquire a home loan. Therefore, besides the eligibility criteria, a home loan and the tenure are somewhere correlated which most of the borrowers are blind to notice. Do you know that your eligibility is tied to the tenure of your repayments? Yes, based on the how much closer you are to an ideal eligibility for a home loan decides how many years you have for repaying the EMIs. Here is the list of factors to know that your eligibility affects your home loan tenure.
What is your age?
Age is the first fundamental factor at the time of taking a loan decides your loan tenure. In case you are in the mid of 20s and 30s, then you can opt for a loan for a long term like 20 or 25 years. But this might not be a favourable option if you are nearing retirement. It is always safe to pay off all your monthly instalments before retirement. You should be wise to avoid risking your post-retirement life.
For example, Mr.Raju was nearing his 40s and availed a home loan for twenty-five lakhs at the rate of interest of 12% for a term of 20 years to buy an independent villa in OMR. With the 12% interest, he paid off his home loan before his retirement age of 60. In case if he has his interest increased at the time of his repayment tenure, the tenure would have been extended a bit longer than assumed. In such a case, the home loan tenure goes beyond the length of the career that makes difficult to pay the EMI without regular income flow.
What is your income?
Your gross income is the second factor that decides the ability to pay the EMI of your home loan. Remember that if you take a home loan for a short-term, your payable EMI would be high. Also, if your home loan tenure is of long-term, then the EMI would be low. Most of the people bump into choosing a short-term loan and suffer paying a high EMI. If you take a short-term tenure at the beginning, then the rise in interest later can lead to a financial crisis that you might end up in burdensome. Other high paying situations like medical bills, children’s education fee may distract you from paying the EMI and it is dangerous
For example, Mr. Raju took a home loan of Rs.25 lakhs for 20 years tenure in the interest of 12% and his payable EMI is around Rs. 27 thousand rupees. While Mr. Roshan who decided to go for a short-term tenure for the same interest but 10 years and his EMI turned out to Rs.35 thousand rupees. The irony is that both planned to buy spacious villas for sale in OMR with same gross income. Now that Raju knows how to manage the monthly instalments and other bills looking after his family while Roshan struggles to manage his daily expenses effortlessly.
What is the purpose to buy the property?
Generally, the interest amount payable is calculated based on the rate of interest and also, the tenure of the home loan. If you choose long-term, then the interest payable would be unquestionably high. In case of a short-term one, then the payable interest would be reasonably low. Therefore, the short-term loan becomes easy to pay and long-term can be expensive to pay. In case you are buying the property to sell it immediately for profit purpose, then a short-term tenure is a better choice for investments. If you are purchasing the property for living purpose, then planning for long-term payments is better.
For example: As Mr.Raju took a loan for 20 years tenure with 12% interest rate for an amount of Rs.25 lakhs, he would be paying around 66 lakhs of repayment while Mr.Roshan would be paying around 43 lakh rupees but with a high EMI for a short-term of 10 years. Choosing a tenure makes a big difference in paying the amount in return.