Home is looked upon as one of the biggest investments, not just financially but also emotionally. Many first-time home buyers often stretch their budget to opt for a home loan, which includes a long-term commitment to paying EMIs. For many borrowers, the repayment tenure for home loans of most lenders, including DMI Housing Finance, Shriram Housing Finance, etc., generally ranges between 15 years and 25 years. However, if you have any surplus funds, then you must repay them as early as possible, which will assist you in becoming debt free faster. Here in this article discussed are eight top ways of repaying your home loan faster –
What are the benefits of repaying a home loan swiftly?
∙ Longer your repayment tenure, the more the interest constituent will be charged. Thus, repaying your home loan as fast as possible may save your overall interest outgo.
∙ You become free from debt faster, which means you may get access to free money to use the same for any of your requirements, splurging or investing.
∙ Like other kinds of loans, home loan part prepayment or prepayment does not levy any charges as the home loan comes with a floating rate of interest.
∙ Making payment of your EMIs on time or making the pre-payment may assist in ameliorating your credit score too.
∙ With an excellent credit history and an enhanced debt-to-income ratio, you will become eligible for new credit options at a better rate of interest than you may require.
∙ This lowers financial burden or stress.
∙ This is a relief to have a strong financial standing.
Here’s how you may repay your home loan quickly.
Make a maximum down payment.
In place of taking the maximum loan proceeds you qualify for, it is recommended to pay the highest down payment possible for you. Doing this will considerably lower your principal loan proceeds and ultimately reduce your EMI and interest burden. For a better and smoother repayment of your home loan, you must make a down payment of at least 20 per cent to 25 per cent or even more in case you have the required surplus funds in hand. If you hold any investments that are not yielding the expected returns, you may consider redeeming them to lower your debt burden in future.
Also Check: Shriram Housing Finance
Select the lenders providing a lower rate of interest
While there are various HFCs and banks that provide a home loan, it is important to conduct your own research, compare distinct lenders and figure out the correct lender that offers a higher value. The lower rate of interest, the faster you can clear off your outstanding dues, as your repayment amount will be less. If you already hold a home loan with a high rate of interest, you may consider opting for the home loan balance transfer option for a lower rate of interest, which can make a considerable difference in the overall interest outgo.
Factor in other important fees & charges
You must choose a lender that not just provides a lower rate of interest on a home loan but even charge a lower fee. Thus, when selecting a lender, you must even factor in processing charges, late payment fees, and other hidden charges, as these charges can make a huge difference in your overall loan amount. Moreover, ensure to pay your loan EMIs on time to avoid any late payment fees. The late payment fees on all loan types are extremely high. Apart from this, your delayed repayments may negatively affect your credit profile and score, which may result in loan application rejection for your future applied loan application.
Enhance your loan EMI
In case you have received a satisfactory increment, or your monthly drawings have enhanced after availing of a home loan, you may discuss with your lender and select to make more payments of the EMI by lowering your loan repayment tenure. It is a very common medium of repaying your home loan quickly, particularly with salaried individuals. Note that even a little enhancement in EMI may considerably lower your loan repayment tenure.
Make part payments as much as possible.
Lenders do not levy any fees for a specific amount of part payment on home loans with a floating rate of interest. Just by part-paying, you can lower your home loan cost drastically. Hence, in place of splurging your excess income, it is recommended to make your home loan part payments whenever you get surplus funds such as bonuses or unexpected income. However, ensure to first check out the prepayment fees or charges with the lender, as few lenders levy a charge if you make part prepayment if your home loan is on the fixed interest rate.
Select your loan repayment tenure wisely.
Choosing a shorter repayment tenure and paying a higher EMI allow you to ensure you repay your debt faster. Besides this, if your loan repayment tenure is shorter, you can end up paying a lower proceed on interest. However, you must note that your home loan EMI burden enhances if you select a shorter repayment tenure. Suppose you are unable to make repayments timely of your loan EMIs owing to any specific uncertainty, you may be charged for delayed repayments, and this may show in your report for a long time period. Thus, you must ensure to select your loan repayment tenure wisely. It is a great choice to opt for higher loan repayment tenures as this computes EMI that you can repay easily. This also makes it easier for you to accumulate or use your surplus funds to make home loan prepayments whenever you can.
Tax benefits
While a home loan is a credit option, which is a costly affair, it has various tax benefits that you must be well versed with to save your substantial money as tax every year. You can get a tax deduction of an amount up to Rs 2 lakh in an annual year for making home loan interest payments as per Section 24. This benefits you the most if you lie in a higher tax slab. For instance, if you are an individual falling in the 20 per cent tax bracket, then you can save an amount of nearly Rs 40,000 in a financial year against home loan interest constituent payment, while if you fall in the 30 per cent tax bracket, then you can save nearly Rs 60,000 in a financial year. Besides this, you even can claim a tax deduction of up to Rs 1.50 lakh every year as per Section 80 C and an amount of up to Rs 50,000 as per Section 80 EE of the IT Act.
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