With the soaring prices of residential properties across India, the dream of becoming a homeowner might stay a dream if you decide to purchase the property with your own funds. Unless and until you are born with fortune, it is virtually impossible to purchase your dream home on 100% down-payment.
Moreover, despite having access to that sort of money, it makes financial sense in availing a Home Loan for a big-ticket real estate purchase rather than diluting your cash. Various benefits that come along a Home Loan make it an ideal economic decision for every prospective homeowner.
Though, in order to meet the rising housing finance need in India, banks and HFCs are offering attractive offers to prospective borrowers; it is very important to choose an experienced lender such as Axis Bank Home Loan.
For, the amount you avail as a Home Loan is a substantial one and can run into Crore in many cases. The maximum repayment tenor offered in India is usually up to 30 years. This offers you flexibility in terms of selecting an EMI amount as per your comfort level.
Like all other loans, Home Loan EMI consists of two components, principal and interest. During the initial period, the interest component is higher as compared to the principal component. While towards the latter half of the repayment schedule, the principal component is higher than the interest part.
In other words, higher is your EMI, lower are your interest expenses, and quicker is the repayment of the principal amount. Most financial institutions allow you the opportunity to use a Home Loan EMI Calculator on their website to determine the ideal EMI amount as per your finances.
If your financials allow, you must opt for increasing the EMI of your Home Loan as it will offer you multiple benefits. Even if it means cutting down on your expenses and pooling all your funds, it is still worth the effort. Here are some of the benefits of increasing EMI of home loan:
By increasing your Home Loan EMI, you can ensure quicker repayment of the amount that you have borrowed. It is entirely worth the effort, even if it requires you to cut down on your lifestyle expenses. By repaying your Home Loan in quick time with a higher EMI amount, you can lead your life more comfortably later on.
This is one of the most significant benefits of increasing the EMI of your Home Loan. The EMI amount you choose has a direct relation with the interest cost that you have to bear. Higher is the EMI amount, quicker would be your repayment, and lower would be your interest cost. Therefore, you must use the facility of Home Loan EMI Calculator available online and opt for the maximum amount that you can afford with your finances. The money saved on interest cost could be used to support your other commitments.
You avail a variety of income tax benefits against your Home Loan repayments. There are benefits available under Sec 80C, Sec 24, and Sec 80EEA under the Income Tax Act 1961, against the principal component and interest component of your Home Loan EMI. Most of the times, borrowers are unable to maximize the benefits available under these sections due to the lower EMI amount chosen. By opting for a higher EMI amount, you can maximize the benefits available under these sections. This will help you reduce your income tax liability and leave you with spare funds that can be used elsewhere according to your requirements.
This is another benefit of increasing your Home Loan EMI. Your credit score improves if you repay your loan amount before time and makes you creditworthy for future borrowings. A higher EMI amount reflects your financial capabilities, and by repaying the entire loan amount in a shorter tenor, you exhibit great liquidity of funds to the lenders. This is a highly sought after quality by lenders and plays a significant role while a lender is assessing your creditworthiness for any other form of loan that you require.
It is an obvious fact that you will increase your Home Loan EMI amount only when you have surplus funds. Most probably, these funds would be coming from either the periodic increase in your salary or from a new source of income that you have created. The usual tendency in such a scenario is to engage in some lifestyle shopping and splurging. Instead, you can use this money to repay your Home Loan quickly and live a debt-free life. So, by increasing your Home Loan EMI, you can ensure better utilisation of your funds and get rid of your financial liabilities in quick time.
If your finances allow you this flexibility, you must consider the option of increasing your Home Loan EMI. The benefits to be availed are substantial and allow you to lead a more comfortable and financially secure life in the future. No matter how low are the interest rates available for Home Loans, the fact of the matter is that it is a loan and must be repaid as quickly as possible.
Also Read: 5 Benefits of Taking a Home Loan
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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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