The Trick to Pay off Your Home Loan Faster
Usually, the first thing that comes to mind when you hear the word “House Loan” is living above your means and having trouble making repayments. A loan, however, does not always have to be something you cannot afford; it can also be a chance for you to become a homeowner sooner rather than later.
With a Home Loan, save a lot of money in interest charges throughout the loan tenure by paying off the mortgage early with proper preparation and budgeting.
The average Home Loan tenure lasts for more than 20 years. However, you can accelerate your path to financial freedom by paying off your House Loan earlier than usual. There are many ways by which you can pay off your mortgage earlier than expected without incurring penalties.
The article lists the top five ways of early loan repayment. Check them out below.
1. Try Reducing Your Loan Tenure
Mortgage loans typically have an amortisation duration of 10 years, though this might occasionally exceed 30 years. Continuously repaying a debt for a single loan for that long can result in a huge rise in interest.
Therefore, opt for the shortest tenure rather than the longest if your budget permits you. Given these facts, you will be on target to pay off your mortgage debt in full within ten years.
Use the Home Loan eligibility calculator and get help selecting a tenure and EMI that fits within your budget.
2. Make a 20% Downpayment
Real estate purchases are typically expensive for most people. In addition to the monthly EMIs, a down payment of 5% to 15% is also necessary. It is better to put down 20% or more of the purchase price to reduce debt obligations.
With a 20% downpayment, your principal amount will decrease, which will lessen interest and the overall repayment. As a result, you can pay off your mortgage debt early on. Also, you can choose a higher monthly payment option to accelerate your loan repayment further.
3. Opt For Partial Prepayment
Make partial prepayments with whatever extra money you may have, such as tax refunds or bonuses. This way, you can pay off the Home Loan quickly without affecting your monthly budget. Know that when you pick mortgages with floating interest rates, there are no penalties for partial prepayment.
When applying for a Home Loan in india, you must clarify prepayment terms and use this option to pay off your debt quickly. Making frequent partial prepayments help you pay off the mortgage faster.
4. Refinance Your Mortgage Loan
Refinance your 30-year mortgage into a loan with a shorter amortisation duration. If you choose a 15-year term for the mortgage loan, you can finish it considerably faster. You might obtain a lower interest rate by combining the mortgage loan with a short-term refinancing option. This way, you end up paying less interest over the long run.
Use the Home Loan eligibility calculator, estimate the cost benefits of refinancing.
5. Avail the Tax Benefits
Although obtaining a mortgage is expensive, several tax benefits can produce sizable annual savings for you. House Loan interest payments get you up to Rs. 2 Lakh tax benefit each fiscal year under Section 24 of the Income Tax Act, 1961.
In addition, Section 80C of the Income Tax Act of 1961 allows you to claim up to Rs. 1.5 Lakh every year, and Section 80EE of the same law allows you to deduct up to Rs 50,000 (if the property’s value is less than Rs. 45 Lakhs). These tax benefits significantly reduce debt obligations making it easy for you to repay the loan faster.
You may save much money on interest by paying off your mortgage early. You can utilise a few different methods to pay off your mortgage early. The most common strategy is to increase the repayment amount. It entails paying additional payments on top of the ones you already made.
Another choice is to make sporadic, partial prepayments. Furthermore, you might refinance your loan for a shorter time frame. You can also make a downpayment of 20% or more to reduce the principal.
All of these strategies can significantly lower your financial responsibilities. Select anyone and stick to them to swiftly pay off your debt. Paying your mortgage early is a great way to reduce your overall interest burden and other debt obligations.