A home loan is the easiest way of buying or building your own house today. However, it is a serious financial commitment and requires you to be disciplined and make timely payments. As the repayment tenor of a home loan can go up to 30 years, one must know a home loan is a long-term commitment. However, there are ways one can repay the home loan smartly in a shorter time. Here are some tips on how to repay home loan faster.
- Increase Down Payment
Increase the size of the down payment instead of taking the maximum loan amount you are eligible for. This will reduce your principal loan amount and lower your interest and EMI burden. For easier loan repayment, make a down payment of at least 20% to 25% or more of the property value if you are financially capable of doing so. So, follow this rule as the first answer to how to repay your home loan faster.
- Apply for a Loan Amount Within Your Reach
Don’t get tempted to apply for a higher loan amount, even if you are eligible for it as per your income. With low home loan amounts, the repayment becomes much easier and faster. A smaller loan amount helps one complete repayment quickly and lift the financial burden off one’s shoulders faster. So, it is advisable to avail of a loan amount that requires a shorter home loan tenor for repayment.
- Research Loan Options with a Lower Interest Rate
Home loans can be availed of on a fixed or floating rate of interest. Fixed rates remain unchanged throughout the repayment tenor, while floating rates change based on the RBI’s policy. By comparing your options, you can choose a home loan that offers the lowest interest rates which helps you save more money in the long run. This saved fund can be used to repay your home loan faster.
- Choose a Shorter Loan TenorHome Loan
Selecting a shorter home loan tenor and paying higher EMIs helps you repay your loan faster. A shorter loan tenor means you pay a lower amount on the interest. A shorter loan tenor also means you can close your home loan more quickly. In addition to this, a shorter repayment tenor also reduces the overall interest that you pay on your home loan, thus helping you save funds for the prepayment of the loan in future.
- Opt for a Home Loan Variant That Allows You to Increase Your EMIs
Home loans typically have a long repayment tenor, going up to 30 years or so. Over this period, your salary will see a raise and receive increments. This extra income can be used to pay higher EMIs and foreclose or partly prepay the loan. To avail of this option, select a lender offering a home loan that allows you to increase your EMIs after a certain period. Even a small increase in the EMI can reduce your loan tenor significantly.
- Make Part-Payments
Lenders do not charge for part-payment on home loans with a floating interest rate. By part-paying, you can significantly reduce your home loan. Hence, instead of splurging your income on non-essential items, it is advisable to do home loan part-payment whenever you have surplus funds, like a bonus, gift, or any other unexpected income.
But, first, check the pre-payment charges with your lender. Wisely choose from among the lenders who allow you to make maximum pre-payments in a month and in a year over the lenders offering you lower housing loan interest rates.
- Do Not Delay or Miss Monthly EMI Payments
Missing or delaying your EMI payment attracts a penalty from your lender. With the regular delay in your EMI payments, the financial burden increases leading to further delays. Eventually, it will take longer to close your loan than the original repayment schedule. Delayed or missed payments also adversely affect your CIBIL score and make it difficult to get loans later on.
- Opt for a Home Loan Balance Transfer Facility
A Home Loan Balance Transfer facility allows you to transfer the remaining home loan from a current lender to a different lender. This helps you to take advantage of lower interests offered by the new lender. This smart decision allows you to switch to a lender that offers more competitive rates so that you can pay lower EMIs and save more money. These funds can then be used to partially prepay the loan and reduce the remaining loan tenor.
These tips on how to repay your home loan faster can help you get rid of the financial burden faster and within a much shorter period than originally planned. Also having a home loan lending partner whose terms and conditions are flexible and borrower-friendly can help you repay your home loan faster.