Being a proud homeowner is a dream for many. But paying monthly EMIs for 15 years or more can feel like a never-ending burden of debt. Your mortgage loan is a big amount that can’t be paid off by swiping a credit card. Your financial health can also experience major changes during this tenure.
But how can you repay the mortgage faster and enjoy more financial flexibility? Well, there are a few simple methods that you can use to shave off a few years from your mortgage loan repayment. Let’s dive into them in detail.
4 methods for early repayment of mortgage loan
1. Make a 20% down payment for the mortgage loan
It’s a simple concept. The higher your down payment, the lower will be your principal loan amount. This instantly reduces your debt obligation while calculating mortgage repayment. Before you seal the deal on the property, try to save enough money to make at least a 20% down payment for the mortgage loan amount to be lower. This will bring down your EMI and significantly reduce the tenure of the loan.
By paying at least a 20%-30% down payment for the mortgage loan, your interest on the overall repayment of the loan will also reduce.
2. Make frequent payments
The repayment tenure for most mortgage loans starts from 10 years. In some cases, it can even go up to 30 years. Making repayments for a single purchase for such a long duration can b burdensome. Instead, opt for the lowest tenure if your budget permits. This way, you can easily repay the mortgage faster within 10 years.
You can use an online loan against property EMI calculator to determine the tenure and EMI that fits your budget. Make sure you also consider other expenses like property tax, retirement planning, education, and wedding of your children, etc.
3. Refinance your mortgage to reduce the tenure
If you’ve already taken a mortgage loan for, say, 30 years, and can afford to increase your monthly instalments, you can refinance it into a shorter-term loan. If you opt for 15-year tenure, you can repay the loan much quicker. Not only this. Several lenders offer better interest rates on mortgage loans when you club it with a short-term repayment option.
Although refinancing to a shorter option will increase your EMIs, you’ll end up saving a lot more on the interest pay-outs. Before refinancing your mortgage loan, you can use online loan against property EMI calculators to see how many years you can afford to reduce. For example, if a 15-year period can strain your monthly budget, you can opt for 20-year tenure. This way, you can still repay the loan faster and save on interest payments while having more financial flexibility to spend on other life goals.
4. Make lump sum payments with the help of unexpected earnings
The best way to pay off your mortgage loan quickly without increasing your EMI is using unexpected earnings to make part payments. Whether it’s a holiday bonus, tax refund, or proceeds from the sale of assets, you can use this extra income to repay the loan quickly.
But remember, this method is not as regulated as the others. Many lenders charge a penalty for pre-payments. So, make sure you check with the lending partner before adopting this approach. But if this is not the case, making a lump sum pre-payment will significantly reduce the amount and tenure while calculating mortgage repayment.
Why should you opt for early repayment of the mortgage loan?
A mortgage loan can feel like a marathon that spans decades. Moreover, it locks in a portion of your monthly income. By repaying the loan quickly, you can save on interest payments and close a significant debt. You can use the extra money to fund other goals like planning for your retirement, investing in the stock market, going on a luxury vacation, your children’s wedding, etc. While buying a house is a major life milestone, these other life goals are equally important.
Gain financial flexibility with early repayment of mortgage loan
Buying a new home is indeed a significant life milestone. But it doesn’t have to come at the cost of years of financial burden. By taking small steps like a higher down payment for the mortgage loan or using extra income for making pre-payments, you can easily repay the loan faster. Moreover, you can use online tools like loan against property EMI calculator for calculating the mortgage repayment tenure and instalment that best fits your budget.
Your home is your biggest asset and repaying your mortgage quickly will offer substantial benefits in the long run. You can also use it to avail of a loan against property from Tata Capital if you’re short of funds. Start with these methods today and manage your mortgage loan smartly!