One of the largest investments, both financially and emotionally, is a home. As a result, first-time house purchasers stretch their budgets and take out a home loan, which requires a lengthy commitment to making EMI payments. The normal home loan repayment period for most borrowers is between 15 and 25 years. However, you should think about paying it back as soon as you can if you have the money to do so. This article explains 9 simple methods for paying down your mortgage more quickly.
Make the biggest down payment possible:
It is advised to make the largest down payment feasible rather than accepting the largest loan amount you are qualified for. It will considerably cut your principal loan balance and, as a result, your interest and EMI payments. If you have the financial resources, you should put down 20% to 25% or more for an easier house loan payback. To lessen your future debt load, you can think about selling any investments that are not producing the expected returns.
Decide on the Lender with the Lowest Interest Rate:
Even if numerous banks and housing finance companies provide house loans, it is important to do your homework, evaluate various lenders, and choose the one that provides the best value. You will be able to pay off your debts sooner if the interest rate is lower because you will have less money to repay. Consider switching to a home loan balance transfer for a lower rate if you already have a mortgage with a high-interest rate to potentially considerably lessen your overall interest costs.
Think About Additional fees:
You ought to pick the lender that provides a home loan with a reduced interest rate as well as lower other fees and costs. Because they can significantly affect the cost of a loan, processing costs, late payment penalties, and other hidden expenses should also be taken into account when choosing a lender. Make sure you pay your EMIs on time as well to avoid late payment fines. Extremely steep late payment penalties apply to all loans. Furthermore, missed payments may damage your credit score, which can result in the rejection of future loan applications.
Boost Your EMI
You can speak with your lender and decide to pay more EMI by shortening the loan term if you have earned a nice raise or an increase in income after taking out your house loan. This is a typical method of paying off the mortgage more quickly, especially for people who make a salary. A slight increase in your EMI might drastically shorten the length of your loan.
Accept Split Payments:
Concerning house loans with fluctuating interest rates, the lenders don’t levy a fee for a set amount of partial payment. Your house loan might be significantly reduced with part payment. Therefore, it is advised to make home loan partial payments if you have extra money, such as a bonus, gift, or any other unforeseen income, rather than overspending.
Make Smart Loan Tenure Decisions:
You can pay off your debt faster by choosing a shorter home loan term and making greater EMI payments. In addition, you wind up paying less in interest if the loan period is shorter. You should keep in mind, nevertheless, that by selecting the shorter loan period, your EMI load would increase. Assume that you will incur late payment fees and that they will appear on your credit report for a long time if you are unable to pay your EMIs on time for any reason. So, while picking the loan duration, you should be cautious.
Even though getting a home loan is expensive, various tax advantages can help you save a lot of money each year. According to Section 24 of the Income Tax Act of 1961, you may deduct up to Rs 2,00,000 in taxes for house loan interest payments made in a given fiscal year. The people with the higher tax rates stand to gain the most from it.
Benefit from the declining interest rate
When the Reserve Bank of India (RBI) reduces the repo rate, loan interest rates often go down as well. You may either reduce the EMI or decrease the time in this situation. If feasible, it is advised to retain the same EMI and reduce the loan period.
If you can, pay a higher EMI
Since these are long-term loans, it is advantageous to pay them off quickly. Additionally, paying off your debt earlier will relieve you of considerable financial and mental strain. One approach to achieve the same effect is to choose a shorter tenor. With such tenors, the EMIs rise, but the interest burden and overall cost of the loan remain modest. Therefore, before applying, make sure you can afford the house loan EMIs. On the other hand, one of the methods to lower your house loan EMIs is to choose longer tenors. However, the same raises the overall amount of interest owed and, thus, the loan’s cost.