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long term vs short term loan

Forums: Early Mortgage Repayment, Mortgage, Economics
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saipavanace
 
Reply Wed 4 Mar, 2015 08:28 pm
I'm taking a home loan of about $150000. I have 3 options in the loan term 12 years, 15 years, 20 years. My monthly payment for these terms are $1800 , $1600 and $1450 respectively. However, I can pay upto $2000 every month (hoping to pay off the loan sooner). My target is to pay off the loan within 8 to 10 years. So, I've thought of taking the 20 year term as the monthly EMI would be only $1450 and I could pay an extra $550 every month towards the principle. Is this a good strategy ? or is it good to take the 12 year loan term and pay 1800$ on EMI and the extra $200 every month towards principle ? Please suggest. Thanks
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fobvius
 
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Reply Fri 6 Mar, 2015 01:18 am
@saipavanace,
Hello Sai, welcome to Able2know.

The repayments you specify are at slightly different interest rates depending on the term selected viz. 10.57, 10.33 and 10.49%p.a. so I assume that the repayments amounts you specify are approximate and furthermore, that you are borrowing INR (Indian Rupee) at an interest rate of about 10.5%p.a..

Assuming that the rate payable is the same for any selected term, the amount of interest paid and the time taken to repay any of the three loans will be identical if you are paying a fixed amount which exceeds the minimum instalment eg. INR2,000 per month.

Given your Master of Science in Electrical Engineering perhaps you could learn how to google up a loan repayment website or phone and ask your bank?
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