6 Smart ways to close your home loan sooner than you thought

Smart ways to close a home loan sooner and earlySmart ways to close your home loan sooner than you thought


Recently I have purchased a residential property and taken Home Loan from LIC HFL. While the first EMI is yet to start smiley, I was thinking about various ways where I can close the home loan faster. What if I close in next 15 years, why not in 10 years, would I be excited to close in next 5 years. Can I, celebrate with a Galata party if I close in next 3 years. I had drawn a plan and checked various ways to close a home loan sooner. I thought it would be ideal to share these thoughts with our readers too.

6 Smart ways to close your home loan sooner than you thought


1) Partial prepayment of loan through Systematic Payment Plan (SPP)

I have created this terminology, hence don’t google it for this SPP. What I meant here is create a plan now to do pre-payment in the new year and work towards saving this from day-1. E.g. if you are intending to do pre-payment of Rs 60,000 in next year, start Rs 5,000 savings from Jan itself every month. Now you can invest this money through recurring deposit for next 12 months and do partial pre-payment of loan by end of Dec. You can also invest this money in short term debt mutual funds to get higher returns. Gradually you can increase the partial pre-payment amount every year.

Also Read: How to pick-up best home loan suitable to an individual?

2) Variable pay / Incentives / Bonus can contribute to partial pre-payment


Many of us work in MNC/IT companies and get yearly variable pay during Apr/May. This amounts to signifant amount as it would be approx 10% of your yearly salary. Just pay this amount as partial pre-payment of loan every year without using this as general expenses. Such commitments would help you to pay your home loan faster.

3) Save and invest in Mutual Funds


One of the best way to pay home loan faster is invest your savings in equity and balanced mutual funds. You can choose a term of 5 to 8 years and do SIP every month. If you want to pay within 5 years, you can select balanced mutual funds to invest in. Mutual funds offer 12% to 15% annualized returns on your  investment and is a best tool to close your home loan faster and sooner.

4) Do Partial Prepayment, but do not reduce EMI


When you do partial pre-payment, banks would give a choice either to reduce EMI or to reduce the tenure of the loan. Best way to close your home loan faster is choose to reduce tenure of loan and not reducing EMI. This way your monthly commitment would still remain same.

5) Increase EMI when your income grows


Every year, employees would get salary hikes. For business men, income increases. One of the smart way is to increase the EMI as and when you see an increase in your income. This would reduce your loan tenure and helps you to close your loan faster.

Also Read: Is SBI Max Gain Home Loan is a unique home loan scheme in India?

6) Switch to lower interest rate home loan


If your home loan provider is charging you higher interest rates, switch to lower interest rates home loan provider. E.g. SBI / ICICI Banks are offering lowest home loan rates ranging between 10% to 10.2%. In case  there is any possibility to switch home loan, you should do that. Consider processing fees or any additional fees involved for such a switch.

Conclusion: While you all might think that I am conservative. I may not adopt all these tips. But I am confident that I would be able to implement majority of these tips and close my home loan faster and early. Wish me all the best.

Readers, what are the creative ways which you are adopting to pay your home loan faster?

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Suresh
Smart ways to close your home loan sooner than you thought

34 comments

  • Dhananjay

    I am doing the same as you have adviced,but Is it ok to pay an extra amount of 5000 on monthly basis or an rd of 5000 which ill pay after one year will be good.Kindly guide

  • Leesa Majhi

    Faster way to reduce the home loan. 

    1. It's better if you go  for montly repayment 

    E. G if you pay montly 5000 then yrly you will pay 6000 and  it will reduce the interest amount montly base  

    2. If you  go for mutual fund or any other investment.. Highest interest rate may be 15%  and if you going for 5 yrs  then u paying a bank double in that 5 yr.. 

    3.best option is to repay after u will get the bonus or hike in salary   in every year   

    4.if you increase your emi after increasing salary.. So according to me don't tk over burden by increasing emi among its better to repay highest amount in bank  after increasing salary 

  • JITENDRA SHARMA

    hello

     I want advice for prepayment of my home loan. My two home loan are running curently. One of the home loan of 10 lakh with tenure of 15 years and after completing 7 years of period outstanding amount is 3.8 lakh. one of the home loan of 17 lakh with tenure of 25 years and after completing 3 years of period outstanding amount is 14.3 lakh. The rate of interst on both the loan is 8.75%.

    I want to repay of the loan from CPF loan where interest rate is 8.5% reducing interest rate.

    My idea to repayment is OK or not. please guide. Also which loan I repay to get maximum benefit of my decision.

    • YATIN POPLI

      Hi Jitendra, 

      It is best to pay -off you loan which have high balance left because soon you pay less you give the interest to bank. 

       

      BR

      YP

  • Phani Kumar

    Hello

    For your point-1, LICHFL and other govt. Banks will allow you to prepay atlease 2000/- pm through cheque. No need of RD andwiat for pay out on the mature. 

  • Poonam chhetri

    I think it would definitely work “ALL THE BEST. “

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