The EMIs for your home loan consists of two parts. The first part is your contribution towards the principal repayment and the other part is what you pay as the interest. So, if you are keen on repaying your home loan early, start planning for it in such a way that you end up saving an amount equivalent to your EMIs every month without disrupting the regular home loan EMI payments. This is just one basic way in which you can create a corpus for early foreclosure. Read on to know the other ways in which you can manage your EMIs to repay your housing loan before time.
Opt for Bigger EMIs when You can Afford It
When repaying a home loan, if you get a chance to readjust your EMIs if your finances permit it, say after 2 years when you are earning more, you can choose a higher EMI value. Choosing a bigger EMI will immediately reduce the total number of years you have left to repay the loan and automatically bring down your overall interest obligation on the home loan. So, consider your monthly expenses and outflow subject to other loans or debts and then if you see you have a bigger corpus of cash in hand to readjust your EMIs and become debt-free faster. You can use a home loan calculator like the EMI calculator to compare your existing EMI with the new one you want to choose to know how much difference it is making on your home loan interest obligation.
Utilise Extra Funds to Part-prepay your Home Loan
Your yearly bonus, a monetary gift for your anniversary, cash you may have got after selling a property, or the money you may have inherited all make up for a corpus of excess funds. You can use this fund to sail out on a vacation or use it to buy an asset. However, it is always good to utilise a part of this corpus to prepay your house loan. On the other hand, you can also time the maturity for your investments in such a way that you always have some excess funds in hand after a regular interval of 3-5 years. Use a portion of the matured savings to part-prepay your home loan. It is good to keep in mind that with every part-payment you will be reducing your overall loan obligation considerably with either smaller EMIs or a shorter loan tenor. This in turn will ensure you get debt-free faster.
Check if Home Loan Refinance is a Possibility
The housing loan interest rate can alter because of varied economic conditions and RBI policy changes. So, if you notice that your interest rate is higher than the rate prevalent in the market, you can look at other home loan offers that give you a chance to lower your housing loan interest rate. You can easily do an affordable Home Loan balance transfer with lenders such as Bajaj Finserv to switch your existing home loan to a loan with more competitive interest rate and other benefits. For example, when you transfer your home with Bajaj Finserv, you will also get a low-interest top-up loan, a 3-EMI holiday, easy online loan account access, and Flexi Hybrid facility on your home loan. Remember though that switching your house loan is advisable only in the first half of your home loan repayment given the transfer charges. So, calculate your savings before opting for it.
Keep these points in mind and monitor your home loan repayments closely so that you are able to get debt-free faster.