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FinFIRST Blogs
Want to repay your home loan before time? Here’s how
If you are applying for a home loan or repaying the principal amount, one of your primary concerns would be to pay the loan instalments on time and close the loan early if possible. Let’s take a look at some options that allow you to repay your home loan faster and get a burden off your chest.
1. Make a large down payment
Home loans are available for up to 80%-90% of the property value. But that shouldn’t stop you from making a larger down payment. To lower the principal amount of the loan at the onset, try to offer a large sum as down payment. Apart from the cash in hand, you can also consider liquidating your investments to increase this amount further. For instance, a fixed deposit yielding 6% interest can help you save a home loan interest at a higher rate.
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2. Prepay the principal amount
You can reduce your home loan tenure or the EMI amount by making a lump sum repayment during the loan tenure. Doing so reduces your principal amount (and consequently, your remaining loan period or EMI). As interest is calculated on the residual portion only, a prepayment reduces your interest cost as well.
3. Opt for a shorter tenure
While applying for a loan, you have the option of choosing a convenient duration. Of course, a shorter loan duration means higher EMIs, but it also means a lower interest cost component. A higher EMI will lead to faster loan repayment, helping you clear your home loan faster.
4. Increase the EMI gradually
Your income can be expected to increase over the tenure of the loan. So, you are likely to be in a position to pay a higher EMI as the years go by. It is an alternative to prepayment, but with the discipline of regular payment. If you can negotiate an increasing EMI option on your loan, you will be able to pay off your loan faster. Home loans are long-term loans, so even a slight increase in the EMI can have a significant impact on your principal and interest amounts.
5. Optimise the loan interest rate
You must have looked for the best home loan interest rates while applying for your home loan. Even a 0.5% reduction in interest can lower your total interest cost by a sizeable amount. In the case of an existing loan, you can explore the possibility of renegotiating your home loan interest rate with your lender. Also, consider transferring your home loan to a different lender if they offer lower home loan interest rates.
The tips listed above can help you speed up your loan repayment and save a considerable amount in interest. As a home loan borrower, you should be on the lookout for such possibilities like extra income jobs which help you to repay home loan faster that can make you eligible for new loans and also improve your credit score.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.
