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

Smart ways to close a home loan sooner and early

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

Suresh KP


  • Karthikraja K

    I am paying 25k every month as my EMI took Sep 2012 for 5 years.
    Will you still advice to use my Bonus to partial prepayment? Tax savings on EMI will go down due to lower interest ??
    I am Planning to move Bonus for investment & Spending on Vacation.

    • Karthikraja, What my intention was to close home loan faster. If I am getting tax benefit, with pre-payment if I am going to loose such benefit, I would try to delay it or avoid it. 

  • Madan

    Good One sir!!

  • Suresh Balivada

    Dear Suresh,

    **ALL THE BEST** (Hope you close your HL soon)

    wishing a Happy New Year to you and all our readers..

    Suresh Balivada

  • Piyush

    The other way to close your home loan faster is through SBI Maxgain or Citibank Home Credit option. The loan rate maybe a little higher than normal loan, but these loans do close faster. I keep all my emergency funds in these loan account, for which I do not get charged Interest. At the same time, I keep my EMI same – so effectively, my emergency funds keep getting utilized to pay off my principal amount thus reducing the tenure of the loan significantly.

    I highly recommend this option if your goal is to close the loan quickly.

    • Piyush, You are indicating the point before taking housing loan. Since I already taken HL from LIC, I cannot take SBI max gain or citi bank home credit option. Thanks for your tip. This may be useful for those who are planning to take home loan.

  • Mahendra

    Nice Read sir ! Thanks !

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