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Tata Capital > Blog > Loan for Home > How You Can Repay Your Home Loan Quicker

Loan for Home

How You Can Repay Your Home Loan Quicker

How You Can Repay Your Home Loan Quicker

Longer loan tenures can lower your equated monthly instalments (EMI). Eventually, though, you end up paying a higher amount as interest, sometimes even more than the principal. For instance, if you take a loan for Rs. 25 lakh for 20 years at a home loan interest rate of 9.25%, you will be paying Rs. 29,95,045 as interest. Therefore, it is advisable to repay your home loan as fast as possible. 

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Of course, home loans offer substantial tax benefits. However, you should run a cost-benefit analysis to find out what your total interest outgo amounts to and how much you will be saving from the tax deductions. If the former exceeds the latter, it is better to clear the loan. Here is a detailed guide to making home loan repayments faster.

Utilize the Pradhan Mantri Awas Yojana (PMAY) scheme

Under the PMAY scheme, if your annual income does not exceed Rs. 18 lakh, you can enjoy a home loan subsidy. You may want to shift your existing home loan under the Pradhan Mantri Awas Yojana through the balance transfer option and take advantage of the subsidized interest rate. It will enable you to pay larger EMIs or prepay your housing loan and effectively shorten your loan tenure. 

You can use online calculators to check your PMAY eligibility according to your annual income and date of execution of your sale deed and find out how much subsidy you are entitled to. 

Make a part prepayment of your home loan

Prepayment of your Home Loan

If you come across a windfall and have no debts with interest rates higher than your housing loan, consider prepaying a part of the home loan. Any bonus or incentive you receive at work can be utilized to make partial home loan repayments. It will lower the principal amount you need to repay. Moreover, after making the payment, reduce the tenure rather than lowering the EMI amount to save on interest.

Keep making partial payments

You can keep making small repayments with whatever extra money you have. You may consider making an additional EMI payment each year. Even small extra payments can lower your loan tenure to a significant extent.

Increase your EMI amount

You may need costlier loans in case of emergencies if you do not have contingency funds. Therefore, when no excess funds are available, do not liquidate your existing savings to prepay your home loan. Instead, you can consider increasing your EMI. EMIs are usually limited to 40-50% of your take-home pay. However, an increase in income with an unchanged EMI can decrease the EMI-to-income ratio. Keeping the ratio constant is recommended to hasten the process of repayment.

Conclusion

A disciplined approach towards financial planning and cutting unnecessary expenses will help you repay your home loan faster.

With Tata Capital home loans, you can start with lower EMIs and increase the amount when your income grows. Apply for quick home loans by filling up simple forms online and take advantage of attractive home loan interest rates as well as flexible repayment options to pay off your home loan quicker.

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