Home loans are a convenient way to help you buy your dream home, however one should repay the amount as soon as possible. Such loans impact your savings and lifestyle, so it is advisable to repay them faster. You must be wondering how it should be done, so read this guide to learn the ways to repay your home loan faster.
Make a large down payment
Down payment is the amount paid upfront during the purchase of a property. The loan is taken for the rest of the amount unpaid once the down payment is done. Generally, a homebuyer should pay around 20% of the money as down payment and the remaining 80% can be taken as home loan. If you stretch your down payment budget and pay more than the required 20%, you may need to take correspondingly less home loan. This will translate into lesser principal and interest amounts.
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
It’s a good idea to prepay part of your home loan whenever possible, for example you can prepay it when you get bonus. Pre-payment of home loans will reduce the principal amount, thus reducing the EMI. Pre-payment also helps in faster closure of the home loan.
See also: Should you consider prepaying your 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.
FAQs
Is it good to repay home loans faster?
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.
How can I pay my home loan fast?
One of the ways to pay a home loan fast is pre-payment of loan.
Can I close my home loan in one year?
This depends on the lender as there is a lender pre-closure tenure that is between one and three years.
Does prepayment of loan affect the CIBIL score?
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.
How many times prepayment can be done?
There is no such time prescribed, and you can do as much as you want and whenever you want.
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