A home loan can buy you your dream house, but the repayment might stretch to 40 years. Paying EMIs for such a prolonged duration can impact your present and future finance. Hence, you should always pay off your home loan faster by carefully managing related factors like loan repayment tenor and monthly installments.
Here are a few tips that can help you pay off your home loan early.
1. Make a down Payment That Exceeds
Do you know? A down payment can significantly reduce the principal amount of your home loan. When you make a down payment for a loan, it reduces the burden of interest and overall repayment by lowering your debt obligation. If you are financially able, make a down payment by giving a percentage of the loan in advance, make sure you pay at least 20% -30 %. This is the best way to start making loan tenor shorter.
Related Article: Tips to save money for your children’s education
2. Make a Part-prepayment
Maybe due to some reasons, you were not able to make a down payment at the time of taking the loan. Don’t worry, you can still pay off your home loan early by making a part prepayment. You can make a part prepayment to reduce the principal during the home loan tenor. If you have already made the down payment, it will further reduce your home loan. As you make a few part prepayment, your loan tenor decreases as well as EMI. Once you have a lower EMI and reduced tenor, it will be a lot easier for you to pay your home loan early.
3. Choose a Short Tenor
Selecting a loan tenor decides your home loan EMI and vice -versa. You often think that long tenor reduces the burden of Higher EMI. But if you have to pay off your home faster, go for a short tenor home loan. Though you have to pay higher EMIs in a short tenor, you can clear your loan rapidly. Also, if you compare the amount of interest for a short tenor with a long tenor, you will have to pay less interest to the former.
4. Pick a Lender with Low-Interest Rates
The interest rate is an essential factor you need to consider when you plan to clear your home loan early. Before you choose a lender for your home loan, make sure you research the market thoroughly and carefully. Make a list of all the landers, check their loan policies and compare their interest rates. Then, select the lender that has the lowest interest rate in the market. It will ensure low and affordable EMIs for your home loan, which you can repay easily and early.
Related Article: Debt snowball method: Guide To Be Debt Free
5. Increase your home loan EMI with time
Increasing your home loan EMI with time can also be a great way to pay off your loan faster. Home loans have the longest loan tenor among all types. As your salary is also expected to increase during this period, you can easily afford higher EMI. When you gradually increase your home loan EMI during such a long tenor, your outstanding home loan amount would decrease with time. It will help you clear your loan earlier than the decided tenor.
6. Look out for home loan balance transfer
Sometimes you choose a high-interest rate home loan due to lack of market research. You can still opt for a low-interest rate by home loan balance transfer wherein you move the huge loan amount to another lender that offers a lower interest rate. It is also an excellent way to close your home loan faster in the initial years of the loan tenor. By moving your home loan to another lender will reduce the interest payout significantly and make it more affordable with lower EMIs
Make sure you implement each of the tips discussed if you want to pay off your home loan faster without affecting your finances.