Home Loan EMI: 90 percent of people make this mistake while taking a home loan, know here..

Every person dreams of having their own house, but most people achieve it through a home loan, which also involves their savings. However, many times people make a common mistake while taking a home loan, which increases the loan repayment period. If it is settled on time and correctly, the loan can be repaid in 20 years, but due to mistakes, it can also be stretched between 25 to 30 years. Therefore, vigilance is necessary in the process of repaying the loan.

How does the duration of a home loan increase?

When there is a change in interest rates, due to this the duration of home loan repayment increases. Most people do not pay attention to this in the beginning. Later when they come to know that the duration of their loan has become very long, they complain about it to the bank. (bank home loan updates)

Let's understand this better with an example-

Suppose you took a loan of Rs 30 lakh at the rate of eight percent for 20 years. In this way, your EMI will be around Rs 25,093. Most banks give home loans at a floating rate. That is, the rate of your home loan will depend on the repo rate.

The repo rate is the rate at which loans are given to all banks by the Reserve Bank of India. Let us assume that after 5 years of taking a home loan, the rate of your home loan becomes 11 percent. At this time, the outstanding principal amount of your home loan will be around Rs 26 lakh, because in the initial years, the interest part is more in the EMI, while the principal amount part is less.

In the situation after 5 years, you will feel that now 15 years of EMI are left, but this does not happen. Actually, as the interest rate increases, it is adjusted with the period of your loan. This is done so that the customers do not have to bear the burden of more EMI. Banks also want to do the same, because the longer you keep paying EMI, the more the bank will earn from you. So if your EMI is kept the same as before, i.e. around Rs 25,093, then the remaining period of your loan will not be 15 years, but 28 years. Here, if your EMI is seen based on 15 years, then it will increase to around Rs 29,500. In this way, what you were going to repay in 20 years, will take you about 33 years to repay.

How to protect yourself from such situations?

If you want to avoid the extension of your home loan period, then contact the bank immediately when the interest rates increase. You have to tell them that you do not want to increase the loan period but ask for an increase in the EMI according to the new interest rate. Most customers ignore this important step and do not get the loan restructured, which increases their financial burden. It is very important to take steps at the right time.

Disclaimer: This content has been sourced and edited from Hr Breaking. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.