One of the biggest advantages of taking a home loan is that you need to pay back small amounts at a time. Called EMIs or monthly equated payments, they are the biggest monthly expense for most people. After paying off the various EMIs, you may find yourself with hardly any money to spend. So how can you reduce your debt burden and pay off your home loan quickly?
It may seem difficult, but it’s not. Here are some simple tips:
Pre-Payments
Make pre-payments whenever you can, if possible, one every year. Pre-payments can directly bring down your principal that is unpaid and help you to repay your home loan faster. This is suitable for those who don’t want to be in debt for a long period.
Higher EMIs
If you have the income, it is always a good idea to choose higher EMIs. This, again, will help you bring down your principal, as well as the interest, and expedite the loan repayment. A word of caution – you must consider your future plans, like for example, children’s education, budgeting for medical expenses, and so on, before you select the EMI amount. There are home loan EMI calculators that you can use to arrive at your EMIs instantly.
Shorter Tenure
The longer the tenure, the more interest you end up paying in the long run; it also means having the loan on your head for longer. Choose a short tenure so that you can pay less interest and pay off the loan faster. Like with the EMIs, consider your financial needs in the immediate future, your budget, and only then make this decision. The tenure and EMIs are things to know before getting a home loan.
Balance Transfer
Look for lenders who are ready to offer lower interest rates, and think of transferring your home loan balance. This way, you can save on the total interest that you are paying on your home loan. You can also do a balance transfer if your current lender is not providing good service.
Higher Down Payment
If you have the funds, go for a higher down payment.This automatically brings down your loan amount, and hence your interest burden, enabling you to repay your loan quickly.
Timely EMI Payments
Missing EMI payments, or even delaying them, can create a ripple effect of trouble for you. You will have to pay a penalty, and it will also bring down your credit score in platforms like CIBIL. It marks you as a risky borrower, and you may find it difficult to get loans in the future.
Leverage Tax Benefits
Home loans can give you some tax relief, under the Income Tax Act 1961. Under section 80C, you can get deductions for the principal repaid, and under section 24(b), you can avail deductions for the interest component. The exact amount is subject to change, so we recommend you check with a financial advisor. Depending on the amount of the loan, first-time homeowners can avail of tax benefits under section 80 EE. Understanding these benefits will help you avail of them and save money, which can be used to make prepayments to bring down your principal.
Conclusion
So now that you know of easy ways in which you can own your own home faster by paying off the loans and reducing your interest and debt burden, get started! Real estate market trends in Kochi indicate that it’s the right time to invest in the city, as it is developing rapidly. Whether you’re looking to settle here, or invest to create wealth or earn a steady income, this is the right time and place to invest in real estate.
Varma Homes is a reputed builder in Kochi who has delivered a number of successful projects. Check out their premium 2 and 3 BHK apartments in some of Kochi’s best residential locations.
FAQs
What are the benefits of making pre-payments on my home loan?
Pre-payments can significantly reduce the principal amount of your home loan, which in turn reduces the overall interest you have to pay. This helps you pay off your loan faster and can save you a substantial amount of money in the long run. Additionally, making regular pre-payments can also improve your credit score, making it easier for you to secure loans in the future.
How does opting for a shorter tenure affect my home loan repayment?
Choosing a shorter tenure for your home loan means you’ll pay higher EMIs, but it will also reduce the total amount of interest you pay over the life of the loan. This helps you pay off your loan more quickly, freeing you from long-term debt. However, it’s important to ensure that the higher EMIs fit within your budget and won’t strain your finances.
Can transferring my home loan balance to another lender help me save money?
Yes, transferring your home loan balance to a lender offering lower interest rates can reduce the total interest you pay, making your loan more affordable. This is especially beneficial if your current lender’s rates are high or if you’re not satisfied with their service. Before making a transfer, it’s advisable to compare the new lender’s terms and any associated transfer fees to ensure it’s a cost-effective decision
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