Buying a home usually has a significant impact on the quality of your life. Not only does it act as an asset, but also saves you from the hassle of paying hefty sums of money every month as rent. Of course, it will help you enjoy an unmatched sense of contentment. However, you may or may not have the requisite amount of funds required to make a purchase as substantial as a house. In case of the latter, opting for a Home Loan is your best bet.
In today’s time, it is relatively easy to Get a Home Loan at Attractive Interest Rates and repayment facilities. Most Home Loans are offered for the tenure of up to 30 years. While this can be a long time for a financial commitment, you can choose to pay off your loan in full before the end of your tenure. This simple step will help you enjoy a hassle-free life without the added responsibility of paying your Equated Monthly Instalments (EMIs), while also ensuring that you pay the minimum possible interest on your loan. Now, that’s what we like to call a win-win situation.
Tips on Home Loan Prepayment
Before we help you with specific recommendations about ways of prepayment of your Home Loan, let us tell you why it is so important to pay off your mortgage as early as possible.
Say, for instance, you take a Home Loan of Rs. 30 Lakhs for 20 years, at a rate of 8.5%. You will be required to pay back an amount of Rs. 62.4 Lakhs to the lender, implying that you will be paying Rs. 32.4 Lakhs as interest.
If however, you take the same loan for 10 years, you will be required to pay back Rs. 44.6 Lakhs, implying that the interest you pay is Rs. 14.6 Lakhs.
Then again, if you repay this loan in, say, eight years, you will only have to pay back Rs. 41.4 Lakhs, meaning that you just have to pay an interest worth Rs. 11.4 Lakhs.
Notice the sizeable difference between Rs. 32.4 Lakhs and Rs. 14.6 Lakhs. You can end up saving close to Rs. 18 Lakhs. Moreover, if you pay off your loan even earlier, i.e., in 8 years of time, you will save a whopping Rs. 21 Lakhs.
Now that you know why is reducing the tenure so imperative let us drive straight to some exciting tips to achieve the same:
Stay Away from Pre-EMI Plans
Numerous builders and even banks offer Pre-EMI plans that need you to pay just the interest until your home is entirely constructed and ready for possession. Under such a program, you will start paying the EMIs, only after you have moved into your new house. While this idea may seem tempting, but it will prove to be in your interest to pay regular EMIs. This will help you start paying the principal at the earliest, which will eventually reduce your tenure.
Speculate the Increase in Your Income
With passing time, your income will increase. You should make a note of this fact, and maintain your income-to-debt ratio. Hence, as and when your income increases, make sure you get in touch with your lender and increase your EMI proportionately. Doing so will make sure that you service your loan more efficiently, thus enjoying the ability to repay the debt at the earliest possible. Again, since the principal remains unchanged, you will end up saving a sizeable amount of money that you would be otherwise paying as the interest.
Reroute Your Unexpected Gains
Whenever you make any unexpected profits or enjoy some gains such as bonuses and incentives, make sure you use them towards one-time payments. These funds will help you finish off your loan sooner than the stipulated tenure.
Make sure you save as much as possible, and then when these savings become sizeable, use them to make part payments. These payments will help you mobilise your small savings, thus helping you reduce a significant financial burden. You can Use Emi Calculator to know how much you can save by making part/full prepayment.
Make Use of the Loan Overdraft Facility
There are numerous schemes available in the market which can help you in comfortable and convenient prepayment of your loan. Home Loan overdraft is one such facility. You can use this facility to make deposits in your Home Loan account, above and beyond your regular EMIs. If need be, you can also withdraw such deposits in part or full. In the long run, this facility will help you enjoy a shorter EMI.
We understand that a prepayment is only an option when you have surplus disposable income in your pocket. However, considering the many benefits of this alternative you should always try towards reducing your loan liability, even if just by a year. Now that you are aware of how to prepay your loan, you can now conveniently apply for Home Loan online.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989. Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.