InvestorQ : I have taken a home loan with a 20-year tenure. How can I repay it faster?
Suresh Patil made post

I have taken a home loan with a 20-year tenure. How can I repay it faster?

Answer
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Samita Patil answered.
2 years ago


: Heartiest congratulations on your new home! It is an exhilarating feeling to be able to call a home your own, but it does come with its own set of worries- that of the loan and its repayment.

But with some discipline and few austerity measures here and there, you can easily repay your loan way quicker than your tenure period.

Check your financial plan

Don’t panic by the mere thought of repaying the huge principal amount along with the added interest over it and don’t start searching for refinance options either. I’d suggest you take a closer look at your current financial plan.

See how your investments are performing and restructure them, if need be. Once you have ensured your investments will take care of your short-, medium- and long-term financial goals, you can use the surplus amount you are left with towards the prepayment of your home loan. However, do not touch your emergency funds or compromise on your financial goals to make this prepayment.

Alter your EMI structure

As and when possible, make a slightly higher payment towards your EMI. An amount as small Rs. 1,000 - 2,000 can go a long way in helping you repay your principal loan amount. As your principal comes down, so does your interest amount. Thus, you can easily reduce your loan tenure by at least 1-2 years.

Make part payments

As and when possible, make partial payments towards your home loan. These days, most large banks allow you and various other home loan customers to make multiple partial payments in a year. Do note that some banks may limit the number of partial payments one can make in a year, so do confirm this with your lender.

Most of us often receive a festival bonus (like in Diwali) or a performance-related bonus, but we spend it in buying electronics like the latest smartphone or the latest television. Instead the same amount can be used to partially repay your home loan. It might seem like you are making compromises with your life or lifestyle, but if you repay your loan quickly, you will end up saving a lot of money in the long run.

Live frugally, for awhile

While it might seem like a tremendous financial burden to pay off your home loan, there’s no happiness that can match that of having your own well-deserved and well-earned roof over your head. With this motivation in mind, start cutting your costs and try to live below your means for the first few years of your home loan tenure.

As discussed above, you might think you are forgoing a lifestyle only in return of a house, but the peace of mind you will achieve on knowing that you’re getting closer to being debt-free is indescribable.

Come one, come all

You may be the sole or the main breadwinner of the family and hence, the burden of loan repayment might fall on your shoulders. But that doesn’t mean that you should bear the burden alone. Get your family as involved in the repayment process as possible so that there’s a concerted effort towards repayment of the loan. Families have expectations and rather than sulking over the fact that you cannot meet their expectations, albeit temporarily, come up with smart and practical ideas of cutting costs while not compromising on the overall family’s quality of life.

Children may not be able to pitch in with extra money, but they can come up with innovative ways of the family spending quality time together, without spending a bomb.

These measures, although seemingly easy, will be very effective towards your home loan repayment journey. If you follow these steps you could actually end up owning your home in entirety way before your loan tenure ends.