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How Does Home Loan Tenure Work?
Tenure of a home loan is the total period being arrived for completely repaying the principal & interest. Typical Home Loan tenure range between 1 year & 25 years.
Tenure is inversely proportional to the EMI; Higher the tenure – lower the EMI and Vice versa
Tenure is directly proportional to the total Interest paid in a loan; Higher the tenure – higher the Interest payable
How to choose a right tenure:
Longer tenures give relief on monthly cash outflows but a higher overall interest amount payable. It is wise to choose a tenure that perfectly balance the monthly payable vis-a-vis total interest payable.
It’s wise to measure & assess current monthly income level, project a conservative/realistic rise in monthly income in 2-3 future time
horizon and basis that decide on a balanced tenure as afore-mentioned, which gives the affordable EMI outflow post the repayment eventually starting.
Below graph depicts the relationship between tenure and EMI/Interest payable of a loan