In recent RBI repo rates hike in last one year makes your Home loan costlier, this will leads to longer Home loan Tenure. Many borrowers feel acute pressure after recalculating their home loan tenure after the announcements of back-to-back hikes in interest rates by their respective banks. This will lead to higher cost of your home loan & recalculation of your future financial goal. Here we will discuss some of the steps which can reduce your overall cost and tenure.
Partial Payment of Home Loan
This is best methods to reduce the longer tenure of home loan. Let’s take example of salary person Mr X. When he took Home loan his EMI is 40 % of his salary says his income is Rs 100 & his EMI is Rs 40 for 20 Years. After 3 Years he keeps growing and with average increment of 8 to 9 % of salary but his EMI remains only Rs40. Now his salary is Rs126 and his EMI is now 40/126=31.75 % of his salary instead of 40 %. If we calculate increase in his expenses even though he has some saving in last three years which he can easily pay towards partial payment of his Home loan. Rotate this option Every Three Years & You will find that he can reduce the total amount of interest he pay over the time and making partial payment can help him to pay off the Home loan faster.
10% of EMI Investments of Home Loan
This is investment option keeping your goal towards zero interest payment towards the home loan principal. Let’s take one example Mr Y have taken loan of Rs 20,00,000 for 20 years at 8% ROI. Now his monthly EMI is Rs 16729 and Interest payment is Rs 2014912. Now as per 10 % of EMI investments of Home loan he need to invest Rs 1700 (Round Figure) in SIP for 20 years. Taking equity return of 15 % Mr Y total Investment is Rs 4,08,000/- and return will be Rs 21,69,123. Which is more than the interest payment of his Home Loan. So Even 10 % of EMI investments of Home loan strategy will zero your interest payment or reduce your interest payment as equity market returns are variable. Calculate your EMI through our Home Loan EMI Calculator.
Fixed Home Loan EMI Percentage of Income strategy
In this strategy when borrow take Home loan his Emi is certain % of His overall Income either salary or business. Now take example of Partial Payment of Home loan of Mr X after three year His income is Rs 126 & 40 % of EMI is Rs 50.4 instead of Rs 40. So next Year he will pay partial payment of Rs (10.4 X 12) = 124.8 means in 3.12 (124.8/40= 3.12) Advance EMI. This is only 3 Year and as soon as his income grow in coming year He will pay off more advance EMI or Partial Payment of Home Loan. Fixed Home Loan EMI % of Income strategy will reduce the total amount of interest payment over the time and making Advance EMI payment will help borrower to reduce the Home loan tenure.