How to Choose the Right Home Loan Tenor?
While applying for a home loan, it is important for an applicant to decide its repayment tenor as it has a prominent effect on the monthly instalments. Applicants have the flexibility to select a home loan tenor of their choice depending on their EMI payment capacity. This can save them from financial burden and allow them to pay the monthly instalments on time.
Tips to choose the best home loan tenor
Some important tips an applicant can use to select an ideal home loan tenor are as follows:
1. Repayment capacity
Considering the repayment capacity will not only help borrowers in choosing a suitable loan amount but also select an appropriate home loan tenor. This helps to plan their finances well, lowering the chances of default.
2. Loan amount
According to the required loan amount, an applicant should fix their repayment tenor such that there is no financial burden during their repayment. Potential borrowers can quickly calculate the EMI using an online EMI calculator.
3. Applicant’s age
An applicant’s age has an impact on the loan amount and tenor. The borrower will get more time to repay a loan if they apply early. Furthermore, they may also get lower interest rates since due to a steady inflow of monthly income that they can use to pay teh EMIs on time.
Ways to reduce home loan tenor
Some common ways to reduce housing loan repayment tenor are as follows:
1. Larger down payments
Financial institutions will only lend up to 70% to 80% of the total property cost. If the applicant increases the down payment amount, the principal amount will automatically decrease leading to a reduction in the EMI. Thus they can easily repay the credit within a lesser duration without any financial burden.
2. Loan reconstruction
A borrower can request the lender to reconstruct the home loan and reduce the tenor in case they are planning to apply for another credit. They can do this by increasing the EMI amounts so that they can repay the credit at the earliest. However, they should calculate the monthly instalments before doing so to avoid financial burden.
3. Increase EMI payments
By increasing the amount of stipulated EMI, a borrower can bring down the repayment tenor as well as total interest payable. This is also a good way to save overpaying in terms of interest. However, on choosing this option, they should ensure that they have sufficient finances to pay the increased EMIs on time.
4. Part-prepayments
Part-prepayment is a great way to reduce home loan repayment tenor while paying EMIs. on receiving bonuses or cash as gifts. With part-prepayments, a portion of the principal amount decreases, also bringing down the tenor. The best part is that they will not have to pay any additional charges for this.
5. Balance transfer
By transferring the outstanding home loan balance from the current financial institution to a new one, reduction in credit tenor may be possible. Moreover, with this reduction in tenor, a borrower can avail loan transfer at comparatively lower interest rates.
Different types of home loan tenor
Before choosing the right home loan tenor, it is important to know its various types of home loans available based on it. These are as follows:
1. Short-term home loan
In case of a short-term home loan, the applicant will have to avail credit at a high rate of interest. So, before choosing this, it becomes imperative for the applicant to calculate the EMI using an online home loan calculator. This ensures that they have enough finances to pay the EMIs on time.
2. Medium-term home loan
In a medium-term home loan the applicant can enjoy low to medium interest rates leading to a comparatively lower EMI. This is because this type of loan has a longer repayment tenor than short-term loans, assuring the financial institution that the borrower will be able to arrange the monthly instalments on time.
3. Long-term home loan
In a long-term home loan, the financial institution provides credit for a long repayment duration. This is recommended when the applicant does not have the capability to pay high EMI amounts to repay the loan. Selecting a longer duration allows borrowers to repay the credit at lower interest rate.
Steps to apply for an NRI home loan
Both resident and non-resident Indian citizens can apply for a home loan. The step-by-step process an NRI applicant will have to follow for application is:
Step 1: Go to the website to apply for NRI home loan.
Step 2: Open the application form and fill in the basic details like name, address, bank account number, contact number, email id, etc., of the NRI applicant.
Step 3: Generate an OTP for verification purposes using any of the contact details.
Step 4: Submit soft copies of all the required documents respectively.
Step 5: Enter the required loan amount, at an eligible interest rate and repayment tenor.
Step 6: Submit the application form and wait for the loan to be approved.
Interest rates for home loan
The rate of interest for NRI home loan are as follows:
1. For salaried individuals:
- Fresh home loan rate: 8.70% to 15.00%
- Balance transfer rate: 8.80% to 15.00%
- Top up rate: 9.80% to 18.00%
2. For self-employed individuals:
- Fresh home loan rate: 9.10% to 15.00%
- Balance transfer rate: 9.50% to 15.00%
- Top up rate: 10.00% to 18.00%
After getting an idea about the significance of selecting the right home loan tenor, a borrower should optimise this duration according to their convenience. Hence, they will be able to avail loans at comfortable interest rates and repay them on time. Besides, even after the loan is already taken, a borrower has the room to adjust its tenor by various possible ways as mentioned above.
