Is it wise to take a Home Loan when you are young?

If you’re at the start of your career, you may see the prospect of buying a home as a distant fantasy. The truth is, buying your own house while you’re young is very manageable and, in fact, far more financially prudent than you may realise. Here are a few reasons why you should seriously consider getting that mortgage and becoming a young homeowner.

You will be eligible for a longer loan tenor, which means smaller EMIs

Most lenders offer home loans to applicants under the age of 60 with a maximum tenor of 30 years. This is because as applicants near retirement age, their obligations increase and income decreases, thereby significantly reducing their loan repayment capacity. The older the applicant, the shorter the tenor—and this means larger EMIs each month. With age on your side, you will be eligible for longer loan tenors and therefore smaller home loan EMIs.

In fact, given the property prices in many cities, you may find that your EMI total to as much as a month’s worth of rent.

You have a low fixed obligation-to-income ratio

While your current income, expenses, and credit score play a major role in how lenders gauge your capacity to repay a loan, they take your potential future financial circumstances into consideration too. As a younger applicant, you will have few to no dependents, as well as a potential for income increase in the near future—especially if you’re only just starting out in your career. Your loan repayment capacity is thus a lot higher, which subsequently increases your home loan eligibility.

The tax benefits go a long way

The income tax deductions you receive on your home loan can go a long way during the early part of your career, when your income is lower and you’re still setting up your house and finances. At this time, even minor savings can go a long way—whether it is towards other investments, basic household necessities or even being able to repay your loan on time.

Home ownership is an investment

Property prices are steadily increasing the world over. What’s more, in a few years’ time you may decide you need to upgrade, or to move abroad, or take a financial risk like start your own business. In either of these cases, the property you own can be an incomparable asset. You can sell it for a much higher value than what you bought it for or rent it out to earn regular income.

Step-up loans and Flexi-hybrid loans offer favourable repayment terms

Many lenders offer special repayment models for younger applicants. Flexi-hybrid loans, for example, allow you to pay interest-only EMIs during the first few years of your loan tenor. Step-up loans let you pay lower EMIs in the beginning and increase them as your salary increases. This helps you repay your loan more easily. So, choosing a lender with options like these can help you while you’re young.

Home loan interest rates are also on a steady rise, so the earlier you take a home loan the better your chances of securing a favourable interest rate.

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