Taking a home loan and building your own house can be done easily, but repaying that home loan feels like an eternity. Having the right strategy ensures that you can pay off the mortgage faster and with much less anxiety. Plan your loan repayment even before signing the home loan agreement.
You can directly repay the principle amount by home loan prepayment which is not a part of your EMI, there are a few smart and super simple ways to speed up the repayment process and save some cash along the way. Let's learn how you can become mortgage-free sooner than you think!
- Round Up Your Payments
You don't need to make huge sacrifices to pay off your loan faster. A simple trick you can use is rounding up your monthly payments. You may not really pay the actual amount, you round it up to the next hundred or thousand, depending on how much you borrowed.
So, for instance, 95000 INR becomes 100000 INR. It can impact your interest rate. This feels very little at the time, but slowly, this little amount adds up and, in turn, saves some years off your loan and knocks off the extra interest you will need to pay.
- Pay Extra When You Can
Pay a little extra on your loan when you get a bonus, tax refund, or other money, above and beyond your regular income. No need to pay extra every month. You can just pay the extra amount when you have it, especially in the early years of your loan. Then, you can enjoy the interests you have saved over time as if finding hidden treasure in your budget!
- Home Loan Refinance
Refinancing isn't only for those having difficulty paying their mortgages, but interest-rate-cut beneficiaries can also save some extra amount with this refinance. You might reduce your monthly payments or the total interest you pay in a lifetime by refinancing at a lower rate. However, you need to include closing costs and determine if refinancing is really worth it.
- Biweekly Pay
Pay every two weeks or bi-weekly. This can add up to 26 half-payments or 13 full payments per year instead of the usual 12 once-per-month payments. For instance, if you usually pay 10,000 rupees per month, here you will pay 5000 rupees every week instead. You can pay off your home loan faster and can also save on interest over time.
- Review your Budget and Cut the Excess
If you want to pay off your mortgage faster, you need to review your budget, cut off the excess spending, and save it for extra payment. Maybe you're paying a bit too much for takeaways or for the laundry list of online subscriptions you hardly use. Reduce that spending and pay down the mortgage, which would save big in the long run, so reassess your budget right now and pay off that mortgage faster.
- Keep Patient, But Keep Pushing
Remember, your mortgage payoff is a marathon and not a race. Sometimes it seems like time is really moving in slow motion, but don't give up, keep going. Don't worry if you can't pay extra every month, just pay a little extra now and then, every little payment makes a big difference and help you easily pay off the debt. Nothing feels sweeter than the day you're finally free from your home loan!
- Prepayment of Home Loan
Many banks and financial institutions encourage borrowers to make additional payments apart from their regular EMIs, sometimes it can be equal to double the monthly instalment. However, you have to be aware as prepayment can attract certain charges. Home loan prepayment can reduce the principle and decrease the interest charges in the upcoming months.
- Use Your Tax Refund
You can take advantage of the following home loan tax exemptions:
Under Section 80C: You can claim an income tax exemption of up to 1.5 lakh rupees against your home loan principle repayment under section 80C.
Under Section 24(b): This benefit is available only if you use the loan to purchase or construct a property. You also need to remain in the possession of your property for at least 5 years to claim the deductions.
Under Section 80 EE: The first-time owners of homes can avail of tax benefits of up to Rs. 50,000 on the payment of interest every year. However, this section allows you to claim such exemptions only if the loan value is under 35 lakh rupees and the property value is under 50 lakh rupees.
Also Read: 7 Reasons to use an EMI calculator before taking a Home Loan
To Wrap It Up
Repaying your home loan doesn't have to be very difficult. Making a couple of smart moves means it will be quick, easier, and less stressful. You can round up payments, refinance, make home loan prepayment, or make extra contributions when you can. There is no shortage of ways to reduce the loan term and save money. Stay focused, stay motivated, and watch that mortgage balance drop!
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