SBI offers 30 years tenure for home loans repayments in the middle of high inflation and interest rates. SBI expected to ease the EMI burden on borrowers. The impact will be good in the short term as this step will reduce the EMI considerably. though, borrowers have to think of the long term implications especially the increased interest outflow on account of increased tenure.
For example, home loan borrowers who took a loan in their 30s, a tenure increase would mean that they will have to keep paying the loan even after retirement. This EMI burden will be difficult to fulfil with advancing age when there is no source of income. Moreover, as borrowers grow older, the expenses will only increase. They would have to decide whether they will be comfortable taking on such a burden for the next 20-30 years.
Prepay your loans in Short terms – To keep the loan amount less troublesome compared to the income, which will allow you to part prepay at intervals. You should start prepaying as early as possible to be able to close your loan quickly and to counter consistent rate hikes. The thumb rule is that loan EMIs should not exceed 30-45 per cent of monthly income.
Home loan emi calculator available online will show that the loan tenure is reduced to around 10 and a half years after the two extra EMIs in a year.
The total interest due in this case would be Rs 15,25,200, a substantial saving.
The additional advantage of prepaying home loan, if you can manage it within your income, is that you will retain complete ownership of the house earlier than planned. The longer the loan tenure, greater the interest repaid.
Increase in tenure may look better in short term but hugely dents your savings. Even if you do opt for it, do remember to prepay in regular intervals, to close the loan much before the tenure as this amount is directly deducted from your outstanding principal amount.