How interest and tenure determine the EMI
An equated monthly instalment (EMI) is the general mode of repayment of home loans. EMIs are the fixed instalments a borrower needs to pay over the tenure of the loan in order to repay the loan as well the related interest for the period to the bank. The loan amount plus the interest for the loan tenure divided by the tenure (in months) gives you the EMI.

The amount of EMI is decided upfront, in advance, and usually remains so during the currency of the loan. The amount of EMI to be paid depends on the amount of loan, tenure of loan, rate of interest, and mode of calculation of interest. Longer the tenure, lower is the EMI. Shorter the duration, higher is the EMI. But at the same time, it is to be noted that in case of longer duration loans, during the initial period, the interest component is more and the principal component is less. Over the years, it gets reversed, and the principal component becomes more while the interest element becomes less. This is because, in the initial phase, the loan amount outstanding is more as compared to the later period.

The shorter the tenure, lower the interest rate because of the reduced risk the bank takes. Because of the shorter tenure, the EMI is higher as the loan and interest are to be repaid over a shorter time span. The longer the tenure, higher the interest rate because of the increased risk the bank takes. However, the EMI is lower because the loan and interest are spread over a longer span of time.

Depending on the present and future income and expenditure levels, you can choose an appropriate loan tenure. The income of the borrower is also important. This means both the present as well as the expected future income of the person. A borrower should be able to pay his EMIs without compromising on his standard of living.

The age of the borrower is important in this case. In case you decide to borrow at an early age, you can opt for the longer tenure loans, where the EMIs would be lower. Although the amount of interest paid would be higher as compared to the other options, you can have the benefit of availing the loan for a longer period of time. However, if you are borrowing at the later years of life, you may have to opt for a shorter tenure.