Home Loan EMI: Most people make this mistake while taking a home loan, it takes double the time to repay the loan..

Everyone dreams of having their own house, for which 80-90% of people take a home loan and also invest their savings. But, often people make a mistake after taking a loan, due to which a 20-year loan gets stretched to 25-30 years.

How does the home loan tenure increase?

When interest rates rise, banks increase the tenure of your home loan, without changing your EMI (equated monthly installment). Initially, many borrowers do not notice this. They later realize that their loan tenure has become much longer, due to which they complain to the bank because they have to pay more interest.

Let's understand this better with an example-

For example, you have taken a home loan of ₹ 30 lakh for 20 years at an interest rate of 8%, due to which your EMI will be around ₹ 25,093. Home loans are usually at a floating rate, which depends on the repo rate. Suppose, after 5 years, due to an increase in the repo rate, your loan rate becomes 11%. Due to higher interest in the initial EMI, your outstanding principal amount at this time will be around ₹ 26 lakh because the interest part in the EMI of the initial years is more, 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 tenure of your loan. This is done so that the customers are not burdened with high EMI. At the same time, banks also want to do this, because the more days 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 as per 15 years, then it will increase to around Rs 29,500. In this way, the loan that you were going to repay in 20 years will take you about 33 years to repay.

How to save yourself from such situations?

If you do not want the tenure of your home loan to increase, then whenever the interest rates increase, you will have to talk to the bank and get your loan restructured. That is, you will have to tell the bank not to increase the tenure, but to increase the EMI according to the new interest rate. Most customers make this mistake and do not get the loan restructured from the bank.

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.