How can prepayment of your home loan EMI help in the long run?

Owning a home is a dream come true, but a home loan EMI, coupled with long loan tenure and high interest, can be daunting. Thankfully, some strategies can help you accelerate your journey towards debt-free homeownership. 

Increasing your Equated Monthly Installment (EMI) or making partial prepayments on your home loan can be a smart financial move. By doing so, you can reduce the loan tenure, save on interest payments, and increase your equity in the property. Let's learn about it in detail.

Benefits of increasing home loan EMI
 

Are you tired of the seemingly endless cycle of home loan repayments? Increasing your EMI could be the solution you have been seeking. Here's why it makes sense -

• Faster loan repayment -

You can shorten the loan tenure by increasing your home loan EMI. Paying off your loan sooner brings you closer to owning your home outright and reduces the overall interest burden.

• Reduced interest burden -

Increasing your EMI leads to a higher proportion of your monthly payment going towards the principal repayment. As a result, the interest component decreases over time, translating into substantial savings on interest payments.

• Potential savings on interest payments -

You effectively decrease the outstanding principal amount with each additional rupee you allocate towards your home loan EMI. This proactive approach can result in significant savings on interest over the loan tenure.

• Improved credit score -

Consistently paying higher EMIs demonstrates financial discipline and responsibility. Lenders take note of this and reward borrowers with an improved credit score, which can enhance your future borrowing prospects.

Advantages of making partial prepayments of home loan
 

Partial prepayments are an excellent strategy to expedite your journey towards loan freedom. Consider the following advantages -

• Reduction in loan tenure -

Each prepayment reduces the outstanding principal, thereby shortening the loan tenure and saving on interest.

• Lower interest outflow -

By reducing the principal amount, you effectively decrease the interest payable over the remaining tenure.

• Increased equity in property -

Prepayments increase your ownership stake in the property, allowing you to build equity faster.

• Flexibility in repayment -

Making partial home loan prepayments gives you the freedom to manage your finances and choose when to reduce your loan burden.

Factors to consider when increasing the home loan EMI or making partial prepayments
 

Before deciding to increase your EMI or make partial prepayments of a home loan, it's essential to consider the following factors -

• Financial stability -

Assess your financial situation carefully. Ensure that increasing the home loan EMI or making prepayments does not strain your overall budget and compromise your financial stability.

• Loan terms and conditions -

Review your loan agreement for any prepayment restrictions or limitations. Some loans may have specific clauses regarding prepayment charges or penalties.

• Prepayment charges and penalties -

Calculate whether the potential savings on interest payments outweigh your home loan's prepayment charges and penalties. Negotiate with your lender for favourable terms if possible.

• Other investment options -

Evaluate alternative investment opportunities that may offer better returns than prepaying your home loan. Compare the home loan interest rates and potential gains to make an informed decision.

Conclusion
 

Increasing your EMI or making partial prepayments on your home loan can be a game-changer in your financial journey. However, exercise caution, considering factors such as financial stability, loan terms, and prepayment charges.

Metra Trust offers home loans with the best interest rates on housing finance and an extensive range of property options. Metra Trust does not impose any part prepayment fees on floating-rate home loan EMI. You have the flexibility to customise the loans according to your specific requirements, all with minimal documentation. Click here for more details.