Tips To Repay Your Home Loan Faster

Introduction

Home loans generally have a long tenure of up to 20 years or more. Most individuals choose to opt for such a long tenure as long tenure means small EMIs (Estimated Monthly Installment). However, having high debts leads to financial and mental strain on individuals. Paying off your home earlier would reduce a significant chunk of your monthly outflows. Moreover, it would also help you get a better credit score and have fewer chances of any defaults or penalties. This article will take you through tips and tricks for quick repayment of your home loan.

 

Why Should You Pay Your Home Loan Early?

Repaying your home loan early only has advantages in the long term. Firstly, it decreases your liability early in terms of duration. If you pay your home loan early, you can relax financially and mentally. It gives you calm knowing that you do not have a financial burden in the upcoming years of your life.

Shorter home loans are also favorable for your credit score. If you want to take any consecutive loan from a bank or NBFC, a good cibil score gives you an edge over other potential clients.

Paying off your home loan earlier also helps you save your home. For instance: You repay your home loan 3 years before the actual time. This means you save interest of 3 years which you would have paid to the housing finance company.

 

1. Strategic Planning: Setting Your Goals

Set your goals in terms of the tenure of your loan, interest rates, and EMIs. If you are planning an early retirement: A short tenure loan is best.

If you want to pay your home loan faster, choose a short tenure. Short-tenure home loans have high EMIs but lower interest rates. Also, it decreases your financial burden in the long term. Additionally, never miss your EMIs. It can attract a significant penalty of 1-2% and impact your credit score negatively. A negative credit score makes it difficult to secure borrowings in the future.

 

2. Power of the Down Payment: A Strong Foundation

Down Payment lays a strong foundation for future payments. Making a large down payment would decrease your overall debt. In return your principal liability and overall interest liability decreases. If your budget allows, go for at least a 20 % downpayment.

 

3. Leverage Tax Benefits: Making the Most of Deductions

Homeowners can leverage home loan tax benefits available under the Income Tax Act 1961.

Section 80C permits deductions up to Rs. 1.5 Lakhs for the principal repaid by the buyer, while Section 24(b) allows deductions up to Rs. 2 Lakhs for the interest component.

 Under Section 80 EE, first-time homeowners can. tax benefits of up to Rs. 50,000 on interest payments annually throughout the loan tenure if the loan value is under Rs. 35 Lakh for a property worth less than Rs. 50 Lakh.

Homeowners can use these tax deductions to reduce their tax liability and redirect the savings towards loan prepayments, potentially shortening the repayment tenure.

 

4. Automate Your Savings: Set It and Forget It

The new homeowner – Automate your savings. Saving more and more money would enable you to use your savings for repayment. Manual savings can be a hassle or sometimes you would simply overspend. The solution to this problem is Automating your savings. Automating your savings involves setting up a system in which a specific sum of money is transferred consistently and automatically from your primary account to a designated savings account. This new-age technique allows you to regularly save money, move closer to your financial goals, and create a safety net for unexpected expenses.

 

5. Make a part pre-payment: The Sooner The Better

Pre-payment refers to the extra repayment of your home loan you pay to the bank. These payments are in addition to your EMIs and monthly interest. For instance: you just received your Diwali Bonus. You can use this amount to pay a significant part of your repayment. This is called pre-payment of your Loan. It decreases your principal amount to be paid back. It also decreases your interest liability on the loan. Consequently, it also leads to a shorter loan tenure.

 

6. High EMIs: Aim High for Your Home

Depending on your financial capability opt for a high EMI (Estimated Monthly Installment). Higher installments ensure that you pay your home loan in a shorter tenure. It can be difficult to pay a significant amount of your income to your lender, but your own home is worth the effort.

Reduce stress and manage your home loan EMI effectively! Explore financial planning strategies here: Easy Ways to Manage Home Loan EMI

 

Conclusion

While it is of crucial importance to pay attention to the repayment strategy of your home loan, it is equally important to celebrate the milestone on the way. Acknowledge your efforts to pay back your loan. Remember; Fast tracking your home loan is never a bad idea.

If you follow the above tips then your journey to a debt-free home loan is going to be better and brighter.