Taking house loan is considered to be a smart move these days. Certainly investment in the real estate sector is lucrative as far as Indian domain considered. But one must seriously look at the pre EMI vs EMI realities before finalizing the legal formalities with the banking authorities.
Short term or long term
Whether one must opt for a short term loan or a long term loan, the decision has to be taken looking at various angles. First and foremost the simple logic is, there is always the tendency to return all loan amounts, because no one wants to carry the burden of it. Secondly short term loans require higher EMI which may not be an encouraging one considering the day to day to compulsory family expenses. Let’s not forget the fact one of the basic aspects while sanctioning loan application from a person of a person is the kind of job he has and the concerned person’s age. The reason behind looking in to such is, the bank wants to see whether the person looks like being able to reduce the loan deficit in quick time or is young enough to carry the EMI for a longer time. Certainly a person in the early 30’s can opt for taking a loan for 30 years and monthly EMI would certainly go down. But there are other serious issues as well.
Banks wants higher recovery dates, or in other words banks certainly want quicker repayment of loans. In many cases it is seen, especially in the USA, when a person fails to repay a loan in a stipulated time frame and the bank has no other option but to seize and auction it; the bank struggles to recover the loan amount. From an Indian perspective, let’s not forget the present perspective that buying a house or property with suitable house loan from bank is not about making it home. Rather it is a healthy investment. In other words, property prices are on the steep rise and one can certainly gain more monetarily with investment in real estate domain with concerned location and associated transport and communication facilities. Let’s not forget the simple reality that one cannot sale a property or house until and unless he repays the loans. Although there are buyers available who are ready to buy along with the loan amount, but such cases are not frequent. Economists often advise people who opt to go for a short term loan, go in a fixed rate whereas the opposite exactly for the long term ones. Due to change in economic policies and others truly interest rates are changed accordingly but government regulating authorities and thus EMIs too vary accordingly. With small savings it is always advisable to go for short term fixed loans. Though the trickiest part is, how much one can handsomely afford as far as paying monthly EMI is concerned. For those inclined to long term loans shouldn’t associate other properties as mortgage as it would involve no opportunity to sale until and unless the loan is repaid.
Thus it completely depends on individuals and concerned financial backup and other aspects before opting for either short term pr long term loans. Both have their benefits. But the decision needs to be taken with much introspection.