Home loan is not just a need but the necessity in the current economic world. Increased in the urbanization, it is easy to avail a home loan for high earnings Individuals. Individuals borrow the loan for purchase the home and to self-construction purpose. It was the thinking of an Individual as to take the loan for short period and repay it as early as possible to get a quick relief from the debts, but as per government policies it is beneficial to avail the home loan for a long-term period.
It is ultimately your decisions whether you should go for a short-term or a long-term home loan. You must decide how much time you need to repay your debt, within a given span of time by the Bank of Financial Institute.
Income tax Benefit
It is the most benefit provided by the Income Tax Act for availing the benefit on Interest payment on home loans. Section 80C allows for the deduction for repayment of the principal component of the home loan. The principal component, in home loan repayment, will be higher than for the shorter home loan tenure, as compared to a longer-duration home loan. Consequently, a significant home loan repayment will be wasted, as you would not be able to claim the deduction under section 80c beyond the specific limit provided by the Income Tax Act, in case you opt for a shorter home loan tenure or opt for the pre-payments of home loan.
Loan Eligibility
For long term home loan, the calculated EMI will be comparatively less than the short-term home loan, so the eligibility for the loan will be more compare for the short term as it is having a high EMI repayment. For long term tenure Eligibility will be higher, so one may able to buy or upgrade to bigger apartment rather for a small apartment for short term tenure.
Rate of Interest
The rate of interest plays an important role in deciding your home loan tenure because this is the cost of credit you pay for taking the home loan. Higher the home loan rate of interest, greater will be the cost of credit and vice-versa.
As to go on the point of conclusion it will be not say wrong that if you go with the long-term tenure, you will pay the interest more than short term home loan but in other aspects you will be eligible for the high Loan amount and you will get the Income tax benefit for long period also.
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