Best repayment mode for home loans?

POSTED BY Praveen Kumar Jayaram ON March 19, 2013 7:10 pm COMMENTS (2)

Hi,

My friend was recommending to take home loan for longer tenure (i.e pay lesser interest per month) and pay more principal amount to clear the loan faster.

His logic does not seem to make sense. Is there any benefit with this approach??

2 replies on this article “Best repayment mode for home loans?”

  1. Ashal Jauhari says:
    March 20, 2013 at 1:06 am

    Dear Praveen, the theoretical answer is already given to you by dear Ashish. Now I want to know, what’s your mly income & how much loan you are looking for with what EMI in mind?

    Thanks

    Ashal

    Reply
  2. Ashish says:
    March 19, 2013 at 7:27 pm

    Dear Praveen,

    Sorry to say, but your friend is recommending the wrong way. Longer term means more interest rather than lesser. In a home loan, initial years attract more interest and less principal. So if you are taking loan for a longer term, in the first few years you will only pay more interest and little principal repayment.

    I suggest, you look at your capacity to pay maximum comfortable EMI and then decide on the tenure. For example, if your loan is Rs.20,00,000 and you can comfortably pay 40,000 as EMI, you need to look at tenure which fits into this EMI at offered interest rate.

    Regards,

    Reply

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