Can’t decide on the EMI amount you should opt for towards the repayment of your home loan? While borrowers and lenders together decide a fixed EMI sum, there is no restriction if the borrower wishes to exceed their monthly instalment amount occasionally. Lending institutions recommend that you reduce your overall ROI and better manage EMIs by paying bigger amounts. Here are a few benefits of paying higher EMIs on home loans.

Interest Savings

This is the most obvious reason to pay higher EMIs. It makes your overall home loan cheaper. Paying a higher EMI also reduces your loan tenure. Let us understand this further through the following example.

Let’s say that Riya has been sanctioned a home loan by her lending institution worth Rs 40,00,000 at an annual interest rate of @ 9.25%

EMI option 1 = Rs 36,635

Loan Tenure = 20 years

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Total interest payable = Rs 47,92,322 

EMI option 2 = Rs 32,907

Loan Tenure = 30 years

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Total interest payable = 78,46,526

If Riya opts for EMI option 2, she will pay a lower monthly instalment but will end up paying Rs 30.54 lakhs more towards overall interest payments on her home loan. You can use a simple online home loan calculator such as the home loan EMI calculator to calculate an EMI option that suits your pace and pocket better.

Tax Benefits

The Government of India wants its citizens to own a home rather than renting one. This is why it provides tax exemptions to all citizens who avail housing finance under Sections 24B, 80C, 80EE, and 80EEA of the Income Tax Act. Under Section 80C, a borrower can claim a rebate of up to Rs. 1.5 lakhs from their gross annual income. Whereas, section 24B increases the deduction amount to Rs. 2 lakhs. Paying a lower EMI may not allow you to exhaust set limit for tax benefits fully.

Freedom from Loan

Taking a home loan lets you buy your dream home, but it also forces you to cringe on various lifestyle expenses. Paying higher EMIs will rid you of the home loan faster, increasing your household disposable income, helping you gain more control over your lifestyle preferences, and thereby making you more stable financially. Paying a higher EMI may feel challenging at first, but watching your loan amount reduce will boost your morale.

Improved Credit Score

Most financial institutions insist upon a healthy credit score before sanctioning home loans these days. Repaying your EMIs on time improves your credit score drastically. It also makes your application stronger for future loans. A healthy credit score plays a critical role in evaluating your financial soundness. 

Over to You

Want to start paying a higher monthly instalment, but finding it hard to calculate the exact amount? Use Tata Capital’s home loan EMI calculator – the calculator is extremely easy to use. Enter in the principal loan amount, the rate of interest, and the loan tenure using sliders or via manual entry and the calculator will automatically display the EMI amount within seconds.

Want to apply for a home loan with Tata Capital? Apply for a housing loan with us and enjoy flexible EMI options at competitive home loan interest rates for all your housing finance needs. Visit our website or give us a call to know your home loan eligibility at Tata Capital today!

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