The majority of financial professionals encourage home buyers to choose a longer home loan repayments term because of the lower EMI load and tax advantages. Shorter loan terms may not always be achievable due to financial constraints, but those who can do so should do so in order to save money, build their credit, and acquire full ownership of their home as quickly as possible. In this post, we go into further detail on the advantages of shorter loan terms, particularly the financial ones.

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Why are short house loan terms financially advantageous?

Calculations in mathematics are necessary for this. Consider taking out a 50 lakh rupee loan at an annualized rate of 8% from a banking company. Depending on the repayment period you picked, the breakdown of your final payment is as follows:

Duration of Property: Last Payment

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Even while the EMI burden might be greater for a shorter period of time, it would result in significant savings over time.

Tax savings are frequently cited as a benefit of extended tenure. Borrowers of house loans are eligible for tax deductions of up to Rs 2 lakh per year for interest payments under Section 24 of the Income Tax Act. They are eligible for deductions of up to Rs. 1.50 lakh per year under Section 80C. As a result, this benefit claim’s duration will increase with increasing tenure.

The deduction allowed for first-time home buyers under Section 24 is substantially smaller than the amount you spend in home loan interest.

You will pay interest totaling more than Rs 2 lakh for over 22 years of the repayment period, which is 30 years. In actuality, you would pay more than Rs 3 lakh in interest over the course of the first 16 years of the loan.

Additionally, by making investments in choices like LIC, PPF, and PF, the majority of homeowners profit from Section 80C. Most of the time, the buyer is unable to subtract any amount from taxes for the principal of the mortgage. Overall, the advantages of tax deductions are insignificant when weighed against the sum and pervasive psychological impact of an EMI.

Keep Cash On Hand And Be Credit-Ready

You may be able to save some money if your house loan term is shorter. For a number of different necessities or situations, you can need money. At critical moments, it’s necessary to be credit-ready and have enough money in your account.

Pay More Quickly To Avoid Obligations

The majority of homeowners who use housing financing are middle-class employees. You might experience financial hardship in the unlikely event that you lose your job or have your pay reduced, which happened to many borrowers during the pandemic. The worst-case situation is that the bank or financial institution will seize your right to sell it to recoup the unpaid loan. A shorter mortgage term helps you avoid such upsetting circumstances.

Advantages of Short-Term Home Loans

According to research, paid individuals between the ages of 25 and 45 are most suited for loans with lengthier terms. Self-employed professionals between the ages of 30 and 40 can also benefit from it. A credit with a longer term enables younger borrowers to purchase a home earlier and enjoy additional benefits, such as tax breaks and section 80C tax rebates, while paying the loan. Here are a few advantages of short-term housing loans:

• Short-term loans often have terms of 10 to 15 years or less, allowing borrowers to quickly pay off debt and acquire home ownership fairly early.
• Due to the tiny loan balance, short-term loans are issued very quickly and with minimal paperwork.
• The EMI amount is typically higher for short-term loans because the payback period is shorter, but the overall interest charged on the loan is less.

Short-Term Home Loans

Banks provide house buyers with a variety of tenures based on their comfort after carefully evaluating the lender’s profile, repayment capacity, loan amount, and other considerations. The majority of borrowers work to pay off their debt as quickly as they can. Although analysts contend that paid borrowers benefit from longer loan terms, self-employed people between the ages of 30 and 40 can also afford longer terms because they do not have a set retirement age. Under section 80 C, younger people can also benefit from tax breaks for a maximum number of years with longer tenures. However, each tenure has its own advantages and responsibilities and is dependent on the preference of the individual. After weighing the advantages of each payment plan, a property buyer may select any of them.

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