8 Easy Ways to Repay Your Home Loan Faster

Jan 24, 2022

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Home is one of the biggest investments, financially and emotionally. Hence, first-time home buyers stretch their budgets and avail of a home loan, which involves a long-term commitment of paying EMIs. For majority of borrowers, the repayment term of home loans typically ranges from 15 years to 25 years. However, if you have financial means, you should consider repaying it as soon as possible, which will help you become debt-free sooner. This article elucidates 8 easy ways to repay your home loan faster.

Benefits of repaying your home loan sooner:

  • The longer the loan tenure, the more the interest you pay. Hence, repaying your home loan as early as possible can save your total interest outgo.

  • You become debt-free sooner, which means you have free money to use for any of your needs, investing or splurging!

  • Like other types of loans, you do not have to pay part-payment charges to the lender as part-payment on home loans with floating interest rates is allowed to a certain extent.

  • Paying your EMIs on time or making a pre-payment will help improve your credit score.

  • With good credit history and an increased debt-to-income ratio, you will be eligible for new loans at better interest rates that you might require.

  • The chances of you missing or delaying the EMI will be reduced.

  • It reduces financial stress.

  • It is a relief to be in a stronger financial position.

Here's how you can repay your home loan faster:

1. Make Maximum Down Payment:

Instead of taking the maximum loan amount, you are eligible for, it is advisable to pay the maximum down payment possible. It will significantly reduce your principal loan amount and ultimately lower your interest and EMI burden. For a smoother home loan repayment, you should make a down payment of at least 20% to 25% or more if you have the financial means. If you have any investments that are not generating expected returns, you can consider liquidating them to reduce your debt burden in the future.

2. Choose the Lender that Offers Lower Interest Rate:

While there are many banks and Housing Finance Companies that offer a home loan, it is crucial to do your research, compare different lenders, and find the right lender that offers more value. The lower the rate of interest, the earlier you will be able to clear off your dues as you will have less amount to repay. If you already have a home loan with a high interest rate, you can consider Home Loan Balance Transfer for a lower interest rate, which can make a substantial difference in the total interest outgo.

8 Easy Ways to Repay Your Home Loan Faster
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3. Consider Other Fees and Charges:

You should select the lender that not only offers a lower interest rate on a home loan but also has lower other fees and charges. Therefore, when choosing a lender, you should also consider processing fees, late payment charges, and other hidden fees, as they can make a considerable difference. Furthermore, make sure you pay your EMIs on time to avoid late payment charges. The late payment charges on all types of loans are very high. Besides, your delayed repayments can negatively impact your credit score, which might lead to loan application rejection in the future.

4. Increase Your EMI:

If you have received a good increment or your income has increased after availing of a home loan, you can talk to your lender and choose to pay more EMI by reducing the loan tenure. This is a common way of repaying the home loan faster, especially with salaried individuals. Even a small increase in the EMI can significantly reduce your loan tenure.

5. Make Part-Payments:

The lenders do not charge for a certain amount of part-payment on home loans with a floating interest rate. Through part-paying, you can drastically reduce your home loan. Hence, instead of splurging, it is advisable to do home loan part-payments whenever you have surplus funds, like a bonus, gift, or any other unexpected income. However, you should first check the pre-payment charges with your lender as some lenders charge after a certain amount or number of part-payments, and some do not charge at all.

6. Choose Your Loan Tenure Wisely:

Selecting a shorter home loan tenure and paying higher EMIs ensure you pay off your debt sooner. Apart from that, if the loan tenure is shorter, you end up paying a lower amount on the interest. However, you should remember that your EMI burden increases by choosing the shorter loan tenure. Suppose, if you cannot make the timely repayments of your EMIs due to any uncertainty, you will be charged for the delayed repayments, and it will reflect in your credit report for a long time. Therefore, you should choose the loan tenure wisely. It is a good choice to opt for a longer loan tenure with EMI that you can easily repay and make pre-payments whenever you have extra funds.

8 Benefits of Repaying Your Home Loan Sooner

7. Tax Benefit:

Although a home loan is an expensive affair, it comes with several tax benefits that can help you save a considerable amount of money every year. You can claim a tax deduction of up to Rs 2,00,000 in a financial year for home loan interest payment under Section 24 of the Income Tax Act, 1961. It benefits the most to the individuals in the higher tax brackets. For example, individuals in the 20% tax bracket can save up to approximately Rs 40,000 in a year against home loan interest payments, whereas individuals in the 30% tax bracket can save up to approximately Rs 60,000 in a year.

Apart from this, you can also claim a deduction of up to Rs 1.5 Lakh per annum under Section 80C and up to Rs 50,000 (if the value of the property is less than Rs 45 Lakhs) under Section 80EE of the Income Tax Act, 1961.

8. Take Advantage of the Falling Interest Rate:

When the Reserve Bank of India (RBI) cuts the repo rate, the loan interest rates trend downwards. You can either reduce the EMI or reduce the tenure in such a situation. It is advisable to reduce the loan tenure and continue with the same EMI or even increase it if your budget allows you to clear your home loan faster.


To Conclude:

Follow the easy ways discussed in the article to get rid of your home loan faster. Repaying your home loan faster gives you surplus money in your hands, which can be used to achieve key goals in your life, such as building a retirement corpus, child's higher education or wedding, family vacation, etc. Plus, paying off your dues early definitely feels rewarding and reduces financial stress.


Warm Regards,
Ketki Jadhav
Content Writer


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