Owning a home is one of the most important financial goals for many people in India. However, getting a home loan can be a daunting task, especially with the high interest rates and long repayment terms. If you are one of the many Indians who has a home loan, you may be wondering how to repay it faster.
The good news is that there are a number of ways to repay your home loan faster and save money on interest. Here are some tips:
1. Make a larger down payment
The larger your down payment, the smaller your principal loan amount will be. This means lower monthly payments and less interest paid over the life of the loan. If possible, aim for a down payment of at least 20% of the purchase price of your home.
2. Make extra payments
Even if you can only afford to make an extra ₹2,000 or ₹3,000 per month, it can make a big difference in the long run. For example, if you make an extra ₹3,000 payment each month on a 30-year home loan at 8% interest, you will pay off your loan in about 25 years and save over ₹1 lakh in interest.
3. Refinance to a lower interest rate
If interest rates have fallen since you took out your home loan, you may be able to refinance to a lower interest rate. This can reduce your monthly payments and save you money on interest. However, keep in mind that there may be closing costs associated with refinancing, so be sure to weigh the pros and cons before making a decision.
4. Consider a shorter loan term
Choosing a shorter loan term will mean higher monthly payments, but you’ll pay off your loan faster and save money on interest. For example, if you choose a 15-year home loan at 9% interest instead of a 30-year home loan at 8% interest, you will save over ₹3 lakh in interest over the life of the loan. However, keep in mind that your monthly payments will be higher.
5. Take advantage of prepayment penalties
Some lenders in India charge a prepayment penalty if you pay off your loan early. However, many lenders have waived or reduced prepayment penalties in recent years. Be sure to check with your lender to see if they charge a prepayment penalty, and how much it is.
6. Make automated payments
One of the best ways to ensure that you make your monthly payments on time is to set up automated payments from your savings account. This way, you’ll never have to worry about missing a payment and incurring late fees.
7. Create a budget
Creating a budget can help you track your income and expenses, and identify areas where you can cut back on spending. This can free up more money that you can use to make extra payments on your home loan.
8. Get creative
There are many other ways to save money in India that you can use to make extra payments on your home loan. For example, you could start a side hustle, or sell unused items around your house.
9. Utilize government schemes
The Indian government offers a number of schemes to help first-time homebuyers and low-income borrowers get a home loan. For example, the Pradhan Mantri Awas Yojana (PMAY) offers subsidies on interest rates for home loans up to ₹9 lakh.
10. Consider a balance transfer
If you have multiple home loans with different interest rates, you may be able to save money by transferring your balances to a single loan with a lower interest rate. This is called a balance transfer.
11. Look for prepayment options
Many lenders in India offer prepayment options that allow you to pay off your loan early without incurring a penalty. Be sure to ask your lender about their prepayment options before you take out a loan.
By following these tips, you can repay your home loan faster and save money on interest. This can help you achieve your financial goals sooner, and give you peace of mind knowing that you’re on track to be debt-free. Please consult with a qualified financial advisor before making any financial decisions.
