I am 40 years old. I took a home loan in 2005 at 8%. now the bank has raised the rate to 12%. The tenure was 20 years. Because of the home loan interest rate hike the tenure is going up to about 25 years. Should I increase my tenure or EMI? Bank is saying pay more EMI.
Rates have gone up globally, so your bank has been forced to raise the interest rate they are charging you
If you increase the tenure, you will continue to repay the home loan till you are 65 years old, which could be past your expected retirement age. It might be challenging to pay your EMI till age 65 as you might not be actively working till that age
If you have the capacity to pay extra EMI, then i would recommend that you pay the higher EMI. You will be able to pay interest, as well as the principal amount and then pay off your housing loan within the original tenure.
Finally, if you have extra money then you can periodically pre-pay small amounts on your loan. also, if you have fixed deposits that are yielding low returns, then you can use these to pre-pay the home loan as well.
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