Home loans offer a convenient means to facilitate the purchase of your dream home; nevertheless, it is crucial to repay the borrowed amount expeditiously. These loans can have a substantial impact on your savings and lifestyle; hence, it is recommended to expedite the repayment process. If you're contemplating how to achieve this, peruse this guide to discover effective methods for accelerating the repayment of your home loan.
Make a large down payment
The down payment is the initial amount paid at the time of purchasing a property. Once the down payment is settled, a loan is obtained to cover the remaining unpaid amount. Typically, a homebuyer is expected to contribute approximately 20% of the total cost as a down payment, while the remaining 80% can be secured through a home loan. Opting to exceed the standard 20% down payment and contributing more may result in a proportionate reduction in the necessary home loan amount. This, in turn, leads to lower principal and interest obligations.
Choose short home loan tenure
A short home loan tenure means you would have to pay the borrowed amount in a short duration. While this means the amount to be repaid will be more as the duration will be short, the payable interest will also be less as compared to the amount you will pay if the home loan tenure is for long duration. Faster home loan repayment will result in better credit score.
Pre-payment of home loan
Making partial prepayments on your home loan whenever feasible is a wise decision. For instance, you can utilize bonuses to prepay your loan. This action contributes to a reduction in the principal amount, subsequently lowering the monthly EMI. Additionally, prepayments play a pivotal role in expediting the overall closure of the home loan.
Research lenders offering low home loan interest rate
Before finalizing the home loan provider, evaluate all lenders available and interests they offer. Choose the one who provides the lowest interest rate.
Leverage tax exemptions made available
Section 80EE: You can enjoy tax benefits up to Rs 50,000 under this section if you are a first-time homebuyer. However, the property value should be under Rs 50 Lakh and the home loan taken should be under Rs 35 Lakh.
Section 80C: Claim tax exemption of up to Rs 1.5 Lakh against home loan principal amount repayment.
Section 24(b): On purchase or construction of a property, you can claim tax benefits under section 24(b). However, you need to be in possession of the property for five years.
Never forget to pay the EMIs. You will be penalised for late payment or non-payment. This will also impact your CIBIL score and credit score.
Also Rear: How is CIBIL Score Calculated for Home Loan?
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Ans 1. It is good to make the home loan additional payment by way of high EMIs so that the bigger component of home loan is reduced.
Ans 2. One of the ways to pay a home loan fast is pre-payment of loan.
Ans 3. This depends on the lender as there is a lender pre-closure tenure that is between one and three years.
Ans 4. No, prepayment doesn’t affect the CIBIL score. Faster completion of loan will make your credit score better and you may be eligible for more loans in future.
Ans 5. There is no such time prescribed, and you can do as much as you want and whenever you want.