Things to keep in mind
Before you opt for a home loan, bear in mind that the value of the EMI depends on the term of the loan. The longer the loan, the higher the interest you will be supposed to pay. The shorter the term, the higher the EMI and lesser interest payable.
However, even as the interest is higher, salaried people prefer a home loan with a longer duration so that the EMI is smaller and they are able to afford a home they dream about.
The PNB Housing Finance home loan
The PNB Housing Finance (PNBHF), a subsidiary of Punjab National Bank, introduced their longer tenure home loans that extend up to as long as 30 years, as opposed to the conventional duration of 20 years, keeping this sentiment in mind. The other features offered by PNBHF include doorstep service with a dedicated relationship manager, no prepayment or foreclosure charges, numerous repayment options, customised eligibility programmes, etc.
What if you take a Rs 50-lakh loan for 20 and 30 years?
Let us consider a scenario where a person avails a Rs 50-lakh home loan for 20 and 30 years with an assumed interest rate of 8.5 percent.
For a loan with a tenure of 20 years, the total amount with 8.5 percent interest rate comes to Rs 1,04,13,840. This comprises of interest amounting to Rs 54,13,840 on a loan amount of Rs 50 lakh. The EMI works out to be Rs 43,391.
If the same loan is availed for a tenure of 30 years, the total amount to be repaid would be Rs 1,38,40,560, that includes an interest of Rs 88,40,560 on the loan amount. However, in this case, the EMI will be lower at Rs 38,446.
Whenever one avails these loans, it is important to not opt for a tenure that extends beyond the earning life, so that the EMIs are paid out of salaries and not the retirement plan. Therefore, long-tenure loans could be a good idea for people who have a service period of around 30 years. Else, it is better to go for a shorter-duration loan.