While a Home Loan comes with the great benefit of letting you build the house of your dreams, it is a substantial financial burden that forces you to shell out a large chunk of your income, month after month, throughout the repayment tenure. Considering that a regular Home Loan Tenure may range anywhere from 20 to 30 years, you may have to drag this burden for a long time to come. Not only can such a burden affect your ability to spend on other fronts of life, but it can also lead to an excessively high-interest outgo over time.
A great way to mitigate these effects of a prolonged debt is to shorten the tenure. Wondering, how exactly can you do so? Well, we have some time tested tricks to help you out!
In most cases, your Home Loan provider will allow you to make additional payments towards the loan, over and above your stipulated EMI. You can do so in one of the following ways:
For instance, if your stipulated EMI is Rs. 22,500, try to round it off and pay at least Rs. 25,000 per EMI.
For instance, if you are required to pay 12 EMIs of Rs. 22,500 each, pay 13 of the same amount in a calendar year.
If you are anticipating a rise in your annual income, apply for a step-up repayment facility, wherein your EMI will increase progressively over the years.
When you receive a big bonus, yield a significant margin on any of your investments, or sell off property at a high profit, or get monetary gifts from close family, or add a source of rental income; make use of these gains to pay advances towards your Home Loan prepayment.
Adhering to any one or a combination of these solutions will ensure that your principal amount gets repaid at a rapid rate, and your interest cost reduces while cutting down the loan tenure.
If your Home Loan entails a long tenure, say that of 20, 25, or 30 years, try approaching your lender for a substantial restructuring of the loan. In this case, you can request the lender to convert your long term loan into a short term mortgage of about 10, 15, or 20 years, whichever suits you the best.
The shorter time frame will help you save a considerable amount that would have otherwise gone towards the interest outgo over the years. Besides, it will effectively reduce your financial burden, which can prove to be especially beneficial when you reach that stage in your life where investing in your child’s education or their wedding will take a higher position on your list of priorities.
Of course, substantially reducing your tenure will also need you to increase your EMIs. To make sure your new EMIs are still within your paying capacity, make use of an Online Home Loan EMI Calculator. Key in your preferred tenure along with your principal amount and interest rate, and find out the EMI. If the EMI is within your means, go for the reduced tenure of your choosing. If not, choose an optimal tenure, wherein you can enjoy comfortable EMI as well as a reduced tenure.
Yet another way of reducing your Home Loan liability is by opting for a Home Loan balance transfer facility offered under a vast majority of products such as Tata Capital Home Loan and alike. This facility lets you transfer your existing Home Loan to a different lender, preferably one who is offering you the loan at a reduced rate of interest or reduced tenure or both. In this case, your existing lender will transfer the unpaid principal amount to the new lender. Of course, this requires a fair amount of paperwork, and in addition, a nominal ‘Transfer Fee.’
That being said, it does allow you to enjoy the benefits of a low Home Loan Interest Rate when you decide to transfer a home to the new lender. Once you procure such a loan, you can then start using the measures listed under Point 1. By far, this will prove to be the most efficient manner of cutting down your interest outgo, while also helping you enjoy the much-desired freedom from the financial onus that a Home Loan entails.
Now that you are aware of some of the most promising ways of prepaying your Home Loan in a manner that is both quick and cost-effective make sure to use one or more of these measures. Even if you’d need to incorporate a high level of financial discipline to repay the loan in a considerably shorter time span, it will all be worth the trouble once you step back into a debt-free life!
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Reshma Rawat is a passionate writer with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra and writes blogs & webpages on financial products (loans, credit cards, insurance, government financial policies, mutual funds, etc.).
Director- MyMoneyMantra FinTech| A senior retail and commercial banking professional, adept at handling Business Development, Sales Planning & Growth, Product Strategy, Marketing Operations and Client advisory services phygitally.
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