The best and most flexible option for buying a home is taking a Home Loan or buy a home in Capital Smart City on monthly installments. With this, you immediately obtain funds for your home purchase. And later repay the loan through equal monthly installments. It is essential to select the correct period of the repayment term. You have options for short-term and long-term loan tenure. To decide between these two, use the Home Loan eligibility calculator. This online tool calculates the principal and repayment amount based on your Home Loan tenure.
The following factors will help you select a loan term that is best suited to your requirements
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- Interest Rate
The interest rate on your Home Loan significantly influences your decision on the loan term. Before deciding on a long-term or short-term Home Loan, determine whether the interest rate is fixed or variable. A fixed rate of interest does not vary regardless of market rates. Whereas a floating rate fluctuates based on market trends.
Short-term Home Loan interest rates are lower than long-term Home Loan interest rates. The rationale for this is that, in the near run, the lender can forecast possible changes in the Home Loan Interest Rate. Because Home Loan payback terms might last up to 30 years, interest rate swings are difficult to predict for a long-term loan.
Your age is important when selecting whether to take out a short-term or long-term loan. If you are in your twenties and have just begun your job, consider getting a long-term Home Loan. As you gain professional experience, your monthly salary is more likely to rise, making it easier to repay the debt. If you are already in your late 40s or early 50s, you will have savings with which you can repay the loan easily. Different banks have different age terms when it comes to Home Loans. Ensure you thoroughly review the eligibility criteria before applying for a loan to get the desired term.
- Purpose of the Loan
If you are purchasing the property for investment purposes and intend to dispose of it as soon as you find a decent offer, you must choose a short-term Home Loan. It will spare you from the foreclosure charges applied when the loan account is closed. Similarly, if you are acquiring the home for personal use, you might choose a longer payback term because lower EMIs reduce the risk of a payment default. You can live comfortably on the property while making the repayments.
Another essential consideration influencing your ultimate decision is the quantity of EMI you can afford. Because Home Loans are repaid in instalments. Short-term Home Loans come with bigger EMI amounts than long-term loans.
On the other hand, longer repayment terms incur greater interest costs and place an additional strain on your shoulders. It would also take a long time to be free from the repayments. You need to strike a fine balance here. Choose a repayment term subject to an affordable EMI amount and an interest payout you can afford throughout the term.
- Interest Cost
The most significant impact of your Home Loan duration will be the interest expense you incur. The longer the payback period, the higher the overall interest cost will be. Since an interest rate is applied for longer, the total payout will be high. Similarly, shorter repayment terms result in lower interest costs.
Before you make a decision, examine the total cost of the loan over its whole term.
- Tax Exemptions
A deduction of Rs. 1.5 Lakh is provided under the Income Tax Act. And this is allowed to the borrowers for principal repayment. Suppose a homebuyer chooses a shorter loan term. In that case, they cannot claim the deduction under Section 80C. Because the tax exemption does not apply while repaying a short-term House Loan.
You need a Home Loan term that corresponds to your payment capacity. Choosing a term that allows you to make your EMIs reasonable will lower your risks of default. You may also use an online Home Loan EMI calculator to receive an estimate of your Home Loan EMI. When looking for Home Loans in Bangalore, compare the different available loan options provided in the city before determining which would be best suited per your requirements.
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