What could be the best Home loan Tanure

The very first ques­tion comes in our mind at the time of tak­ing home loan is for how many peri­od loan to be taken/ what would be the best home loan tenure.  Home Loan on your house, besides being a long-term lia­bil­i­ty, makes you eli­gi­ble for sig­nif­i­cant tax breaks. You can claim deduc­tion up to Rs 1.5 lakh for repay­ment of home loan prin­ci­pal under the over­all lim­it of Sec­tion 80C of the Income Tax Act. More­over, you can claim an addi­tion­al deduc­tion of up to Rs 2 lakh for inter­est pay­ment. In case of joint home loan with your spouse, then each of you can claim both these deduc­tions pro­por­tion­ate­ly, thus opti­mis­ing your tax sav­ings further.

One has to first make home pur­chase bud­get is how much do you cur­rent­ly have and how much you would have to bor­row from bank in the form of a home loan.

While decid­ing on best home loan tenure we are tak­ing 4 sce­nar­ios where we are going to bor­row 30 lakhs @ 10.25% rate of inter­est per annum for dif­fer­ent peri­ods & the same will be dis­cussed on tab­u­lat­ed format:

EMI is low­est in the loan tenure of 25 years. Now we are com­par­ing 1^st & 2^nd Sce­nario where term decrease by 25% & EMI pre­mi­um increase by only 5.97%. So if we can afford that 5.97% increase in EMI We should nev­er go for 25 years Term. Now if we com­pare 2^nd 7 3^rd sce­nario where Term decreased by 25% & EMI Increased by 11.04% only. There­fore if we can afford 11% increase we should reject 20 years term. Now if we com­pare 3^rd & 4^th sce­nario where EMI increased by 22.52% with a decrease of around 33% in Term.

But here comes ques­tion of afford­abil­i­ty whether we can afford the loan pre­mi­um of 10 years term. Month­ly loan pre­mi­um is around 1% for 25–15 years term which increase sharply to 1.34%.

Here to con­clude 15 years term is far sav­ing than the 20–25 years Term loan. We know Loan term is low­er the bet­ter. Depend­ing upon the afford­abil­i­ty 10–15 years term of Home loan is the best peri­od for which home loan can be taken.