Help in deciding home loan tenure – Urgent

POSTED BY Kartik Sudarshana ON November 8, 2012 10:02 am COMMENTS (13)

Hello Experts,
        I have booked an apartment(Read to move it) and decided on SBI for taking loan.  I am confused if I should take 10/15/20 year tenure.  I looked up lots of articles but did not get the exact query that I have.

Loan amount is 35Lakhs. Interest rate is 10.15%

Loan type: MaxGain Overdraft account.
EMI vs Tenure:
10yr : 46,544
15yr:  37,933
20yr: 34,124

I have read about all the advantages and disadvantages of long and short tenure but here is my unique question:
If I take a 20yr tenure BUT pay EMI each moth equal to that of a 10 yr tenure, then, will I finish the loan in 10 Yrs? Meaning, I need to just pay 34,124 but I decide to pay 46,544. This means that the extra amount ( 46,544 – 34,124) would directly reduce the principle each month.

I want to have the advantages of a long tenure like less strain on my expenditure, more flexibility incase of job loss or recession as mandatory EMI will be less BUT I want to have the benefits of 10 yr tenure in terms of interest/principle ratio.  Hence I want to know that if I choose a 20yr tenure but pay a 10yr tenure EMI, will the loan finish in 10 years? If not, how much more delay/early will it close?

13 replies on this article “Help in deciding home loan tenure – Urgent”

  1. Puja says:

    To know the exact Interest and Principal that is deducted use “Loan Amortization Calculator” to obtain the details.
    You will get entire breakup of your emi based on the interest rate. Please find link below.
    Based on this if you have surplus amount, you can increase your emi and decrease your tenure. It is advisable to reduce your tenure as less interest is deducted if your loan tenure is 10years as to when it is 20years.

  2. Dear Kartik, if it’s Max Gain loan, the loan ‘ll not complete in 10Y. it ‘ll take 20Y to complete the only impact (positive) on you ‘ll be that, interest outgo ‘ll be zero after your drawing power matches with your available balance. How fast you can make up available balance to match with DP is the key to success here.

    Please read the largest discusion in the forum (obviously on Max Gain) to understand.



  3. Kartik Sudarshana says:

    Hi Ranga Rao,

    The Xlsheet you sent me did not have any details filled and hence I could not find out where the mistake is.. I have filled the Xlsheet with all the data above and it also shows that I can finish the loan in exactly 10 years. I have sent you the filled Xlsheet. You can compare with what you had filled to know the difference.

  4. arkrangarao says:

    I have sent you the mail – maxgain calculator. Please check and let me know if I have done any mistake.

  5. Kartik Sudarshana says:

    The interest component obviously varies as the principle component varies in the first row which changes the outstanding amount. Based on the outstanding amount , all components of next row change.
    Please send me the filled xls by mail I will show you where you might have made a mistake.
    Its logically impossible to finish a loan in less than the tenure under discussion.

  6. arkrangarao says:

    Hey karthik,

    Even I am amazed to see the interest in the first EMI to be the same, irrespective of whether the tenure is 10 yrs or 20 yrs…

    But if you observe the interest component varies as you go down the excel… And I am sure it will be closed in 7 yrs or so. let me know if you have any issue in understanding.

  7. arkrangarao says:


    In this case, if you take the loan for 20 yrs tenure and pay an amount of monthly 46,544 ( which is the EMI for 10 yrs) you should be able to close the loan before 10 yrs. You will actually take 7 yrs to close the loan…

    Let us consider it case by case…
    20 yr Loan case, where you are paying 46,544 as the EMI: you will take 20 yrs. the 46544 will be partly considered towards principal and interest.
    10 yr case where you 46544 (additional amount of around 12400 + the actual EMI of 34124) –
    In this case 34124 will be considered towards principal and interest.. But the additional amount of 12400 will be considered only towards principal. So if you continue doing that every month, you should be able to close the loan in 7 yrs. I have a calculator for such things which I have downloaded from net. Please let me know in case u need it for better understanding.

    1. Kartik Sudarshana says:

      Hi Arkangarao,

      I just checked in an Xlsheet which I have got. Lets consider the first month of payment in both cases :

      20 Yrs:
      EMI: 34,124
      Principle: 4520.16
      Interest: 29,604.17

      10 Yrs:
      EMI: 46,543
      Principle: 16,939.80
      Interest: 29,604.17

      If I am paying 12,400 extra in the 20 year tenure, then towards principle, I pay 4520 + 12400 = 16940!!! Which is exactly equal to that of 10 year tenure..

      Whats very interesting is, no matter what tenure we choose, 5/10/15/20, interest component paid in the first MONTH is the SAME!! This is what makes the tenure ONLY and ONLY dependent upon the EMI we pay each month.

      Hence, the logic of 7 years is definitely not convincing. If that were true, people would never choose a lower term even if they could afford to pay the EMI. Right?

  8. Kartik Sudarshana says:

    Thank you so much Manish.. This is exactly what I was looking for.

    I agree to what you say about some banks having restrictions on prepayment. That is one reason I am going for the overdraft Maxgain account from SBI in which I will not be technically prepaying any amount but will just KEEP extra amount in the bank as and when I can afford it. It will have the SAME effect as prepayment but a major advantage of having the option of withdrawing the money if I need it for emergency. Its just like a simple bank transfer ( in both directions). I could keep putting and removing any extra amount(over and above the fixed EMI) any number of times. I did confirm this point from the SBI branch manager.

    Yes, I will think about the 15 year tenure plan as well.

  9. Karthik

    Good news . The answer is YES , What really matters is what you are paying each month and how much is getting deducted from your Principle outstanding . So if you take 20 yrs tenure and pay the EMI for 20 yrs, then your loan will finish in 20 yrs, but if you pay the EMI which is equal to 10 yrs EMI , then in that case the loan will finish in 10 yrs ,

    to theoritically the answer is YES .

    But, now coming to the real life . There are some things which you might want to consider, depending on your bank, there might be restrictions on how much you can prepay in one go . Like some banks say that minimum prepayment amount has to be equal to or more than 3 months EMI , also one can prepay only X number of times in a year ….

    So due to all these things , you might face some issue , but i understood your issue and I think if you have the ability to pay high EMI , then better pay high EMI and keep the loan tenure as 20 yrs , but check with bank on the arrangement or the plan you wish to have .

    Overall you are thinking in right direction . Instead of 20 yrs , why not take it for 15 yrs and then prepay whatever you can ! ..


  10. Biswa Singh says:

    Please talk with the bank and understand the process properly. If you are opting for 20 years tenure then your EMI will be fixed and you can not change it unless and until you request the bank. But yes if you have additional money then you can put that in Max gain account which will reduce your interest and if you can manage to put sufficient money in 10 years to close the loan then do so.

    1. Kartik Sudarshana says:

      Thanks for the reply Biswa but I think you did not understand the question clearly.
      I know that EMI is fixed and I don’t want to change it. Yes, assuming I have excess money every month, if I pay this excess money (46,544 – 34,124), my question is , will I be able to finish the loan in EXACTLY 10 years ( 120 months).

      I want some calculative proof and not subjective one. As I said, I want the benefits of 20year loan but I am prepared to pay the EMI as that of a 10 year loan.

      1. Biswa Singh says:

        But how could some one provide you with calulative proof if he does not know how much is going towards the principal amount for 10 years. If interest rate fluctuates then your principal and interest component also changes.

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