Factors affecting your Home Loan Tenure - Home Loan Blog - Tata Capital

4 Factors That will Affect Your Home Loan Tenure Decision

Mar 08, 2017

Buying a home can be a very satisfying feeling. It gives you a sense of ownership and the bragging rights to tell others that you have arrived. But when you have to pay monthly EMIs for years, it can be honestly draining experiences for the borrower.

It is for this reason that it is important to give some serious thoughts to the loan tenure that you wants to take. There are 4 important factors that you should consider before finalizing the home loan tenure:

  1. Loan Amount - Lenders generally offer longer tenure to help borrowers increase the loan eligibility. The EMI should not be more than 40% of your take home pay. So for longer tenure, the EMI is lower which helps increase the eligibility on basis of EMI.
  2. EMI - As already mentioned, EMI too pays a big role in deciding your loan tenure. If you want to have a low EMI, it will result in longer tenure. On the other hand if you are comfortable servicing a higher EMI, then you can chose to take a shorter tenure. Shorter tenure also helps in saving a lot of money in interest paid.
  3. Interest Rate - This is fairly simple. If all other factors like loan amount, interest rate, etc. are constant, then lower interest rate means lower EMI. Or you can ask you lender to increase your EMI and shorten your loan tenure.
  4. Borrower's Age - Lenders want to ensure that the loan is repaid back much before a person ceases to earn, i.e. retirement. Hence most lenders are unwilling to lend to old people unless they can prove a sustainable and reliable source of income.

So these are some important (but not all the factors) that can help you decide the home loan tenure. It's always advisable to take a loan with shorter tenure if you can comfortably service a slightly higher EMI.