Every person dreams of owning a home and while many manage to achieve this without any help at all, a majority of us need to take a home loan. Simply put, a home loan is a financial aid that helps you achieve your lifelong dream of buying a house. However, while availing a home loan may be easy, it comes with its very own sets of responsibilities that are to be fulfilled diligently.
Yes, we are talking about the EMI (Equated Monthly Installments) that you need to pay on a monthly basis to your lender, in order to repay your Home Loan. And while there are many factors which influence the EMI you pay, the most crucial factor is the loan repayment period.
But before we proceed any further, let us understand what exactly an EMI is?
As mentioned earlier, EMI is a sequence of monthly payments that you make to your loan company to pay back the loan. This amount does not vary dramatically over time, unless there is a sudden change in the rate of interest, or you pre-pay a part of your loan’s principal amount. Since no lender will give you a loan without charging any interest on it, EMI is a mix of principal amount and the interest applied to the same.
In the initial years of the repayment period, a huge chunk of your EMI goes to interest. However, over time, this ratio reverses with principal being the major component of your EMI. This is because as principal amount reduces over the years, the interest applied reduces too.
Loan Tenure vs. EMI
As a rule of thumb, greater the home loan repayment period, lesser is the EMI you will pay and vice-versa, for a particular loan sum and rate of interest.
For example, let us assume that you need a home loan of Rs. 40,00,000 at an interest rate of 11 percent. If you choose to repay your loan over a period of 30 years, then your monthly commitment will be Rs. 38,093. However, if you reduce your tenure to, say 15 years, your EMI will shoot up to Rs. 45,464. The following table illustrates how your EMI will vary with respect to your home loan tenure, for the mentioned rate of interest and principal amount.
Loan Repayment Period
Rs. 45, 464
Rs. 41, 288
Now that you know how home loan EMI and home loan repayment period are related, let us take a look at how you can find a balance between the two.
Considering that an EMI is a serious financial commitment, there are a couple of factors you need to take into account before you decide on your loan tenure.
Age – When it comes to availing a home loan, your age plays an important role. Since your lender expects you to pay the loan before you retire, your age will play a part in determining your tenure. If you are in your 20s or early 30s, then you will have better chances of getting a longer repayment period.
Your Income – Your monthly income, expenses, and obligations must be considered before choosing an EMI amount. Ideally, you should be able to pay your monthly installment easily, after factoring in the above expenses. Once you arrive at an amount you’re comfortable paying on a monthly basis, you can then decide on the tenure.
Pre-paying – Many lenders have the provision of pre-payment towards the home loan principal amount. Doing this brings down the principal sum and in turn, the interest to be paid. This correspondingly leads to a reduction in the EMI, which may be translated into a change in loan tenure.
Life Stage – It is wise to consider your life plans before you settle on an EMI amount. If you are going to start a family, then your monthly expenses will only increase. In such a case, it is advisable to go for a longer tenure and a lower EMI. However, if you are approaching the age of retirement, then your EMI and loan repayment period will be such that your loan is repaid in full by the time you retire. This would generally mean a shorter tenure and a larger EMI.
The above factors will help you determine the kind of home loan tenure you should be looking at, while opting for a home loan. It is important to do thorough research on this front and arrive at an EMI amount that you are comfortable paying on a monthly basis. You can also use our Home Loan EMI Calculator to find out how much EMI you may have to pay, to own your dream house.
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I have taken Home loan directly through Corporation Bank .I have applied for the loan amount of 12 lakhs for the tenure of 18years .More documents collected for this home loan and got the loan amount on time and it was really sufficient .There was no drawbacks faced so far .I am satisfied with the service .
I had applied for home loan with HDFC limited on few months before, they have sanctioned a loan for 22 lakhs but due to some problem of my builder from my end I kept on hold for the loan process. They have detected for the processing fee of 11 thousands but they refunded 9 thousands rupees. The tenure of 15 years. Interest rate was nominal of 8.55%.
With HDFC limited I have taken home loan on 8 months before which was processed through them directly. They have approved for 8 lakhs but as of now I have taken only for 5 lakhs remaining 3 lakhs I will get later from their end. Due to shop will come in commercial loan so I have split the loan amount to get it. For the tenure of 15 years. The processing fee for 5000 rupees. The rate of interest 8.8%, they have sanctioned the loan within one month.
I have availed Home loan directly through Punjab National Bank .The rate of interest and the processing fee was very high ,I have got the loan amount on delay basis and i have applied for 26 lakhs for the tenure of 15 years.I have not faced any difficulties until i have received the loan .
SBI Home Loan is excellent because I've a salary account with them. They offered me a interest rate of 9.5% approximately. I took the loan amount of Rs. 23 lakhs so far i have got only Rs. 16 lakhs since my building is under construction. My EMI is not yet started. They sanctioned the loan in 2 working days.
SBI is a best bank and they had a better option. There is only simple documentation required and executive came to my place for collecting all the documents. I got the loan within 7 days. SBI did not taken any processing charges and they gave better and cheap interest. They take minimal time and better response from the customer care so i had chosen SBI for my home loan.
My home loan was purchased from Central bank of India. The branch offer was approved the loan immediately and they had a good behavior with the customer. I got the better clarity about the loan process as well as the rate of interest in central bank of India is less than compared to others so i have chosen this bank and the Branch Manager helped me in a better way.
From DHFL I have taken a home loan almost more than a year. One of my cousin's friend working there he recommend to apply for a home loan. The process was smooth and sanctioned a loan within 6 days with sufficient amount of 20 years. The rate of interest was high.
ICICI bank has provided me a home loan at the time of i want on a immediate basis. Since the necessity is over they have provided me a timeliness loan. I taken the loan amount of Rs. 10 lakhs and the have charged me a higher interest rates which i'm not comfortable with.
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DIVYESH PRATAPBHAI FERFA
Reviewed on Oct 05, 2019
I have balance transfer for a home loan with existing finance to HDFC LIMITED. One month before only I have a transfer of a loan. They have outstanding amount of 10 lakhs for the tenure period of 10 years. The rate of interest is 8.6% only for mortgage charges for 8 thousands need to pay for it.
I have taken a home loan with SUNDARAM FINANCE on 10 years before which was processed through them directly. The amount which was given for 13 lakhs for the tenure period of 20 years. There was lot of issues I faced with them customer service is not good response. The rate of interest was high of 14% compare to other.
I have taken home loan directly through State Bank Of India .The rate of interest and the processing fee was nominal ,I have got the loan amount on time and got a clear picture about the loan process ,I have availed this loan for the tenure of 20 years .I have completed only 2 years of EMI so far .,
I have taken Home loan directly through Central Bank OF India ,I have got the loan on exact time ,The rate of interest and the processing fee was nominal ,I have got all the details about this loan very clearly through bank agent.The process was very easy and still this loan is active .
Nearly 11 years before I had taken a home loan with STATE BANK OF INDIA which was processed directly to them.The loan amount was sufficient for the tenure period of 15 years. The rate of interest and processing fee are nominal. They have sanctioned a loan within few days and the process was good.
I have just applied the home loan from Central bank of India. I had a reference over there hence i applied the home loan from Central Bank of India. Documentation process was hassle free. They have offered me a interest rate of 10.1% and the processing fee was 1% of the interest amount +18% GST charges. They have dispatched the loan 20 days. The staffs are so friendly
HDFC was the only bank which is offering for the home loan in the area where i have purchased the house so i opted with HDFC LIMITED. I had applied the loan amount of Rs. 28 lakhs and the given interest rate is 8.5% and they charged me a processing fee of nominal one. I took the loan 3 years ago and they took 40 to 50 days to sanctioned the loan.
I took a home loan with PNB Housing Finance Ltd because the terms and conditions are very liberal at that time, I have been expecting higher loan amount for my purchase. They have fulfilled my requirements and its more than 90%. The rate of interest is little bit higher and they are not following RBI guidelines. When interest rate is increased, they have started charging more but not reduced when it got reduced.
I have completed my home loan with HDFC BANK before 3 years ago. I did foreclosure and that time the interest rate is not much. I bought a residential property and the loan procedure is very easy because my papers are strong and clear to proceed faster.
I have applied for Home loan directly through Bank Of Baroda and got the loan on stipulated time .This loan was upto 15 years and got the loan amount on time ,The agent gave all the required information about the loan process .I have got all the required details about the loan process and there was no drawbacks faced as well.
I am not happy with rate of interest which was given by LIC Housing Finance. I have purchased the Flat in 2017August. The loan amount was 40L and its 15 years tenure. The processing fee is not applicable. The customer service is good. But every year, they are raising the interest rate which was not good.