How to Repay a Home Loan Easily?

For those struggling to repay home loans and ending up paying twice the principal amount in interest over their lifetime, here are three simple methods to repay it more easily!

Many people take home loans because they can't afford to pay a lump sum amount and because they receive tax benefits on the interest and principal components of the EMI (Equated Monthly Installment). Most people want to repay their home loans quickly.

In India, although home loans are typically taken for 15 to 20 years, statistics show that people generally repay them in about eight years.

If you repay the home loan over the chosen tenure, the interest paid will be very high. Let's see an example:

- Loan Amount: ₹25 Lakhs

- Repayment Tenure: 30 years (360 months)

- Interest Rate: 10%

- Monthly EMI: ₹21,939

Here, the loan amount is only ₹25 Lakhs, but the total interest paid would be approximately ₹54 Lakhs. (See Table 1)

Instead of repaying the loan over the entire tenure, you can follow some strategies to save a substantial amount on interest. They are:

1. Increase the EMI Amount Monthly:

   If you pay an additional ₹3,061 per month, making the EMI ₹25,000 instead of ₹21,939, the home loan will be repaid in 216 months instead of 360 months. 

   In this case, the total interest paid will be only ₹29 Lakhs. That means you save ₹25 Lakhs in interest by increasing the EMI by ₹3,061 per month. (See Table 2)

2. Increase the EMI Annually:

   After paying the regular EMI for the first year, if you increase the EMI by ₹5,000 every year, you can save a significant amount on interest. 

   By increasing the EMI by ₹5,000 every year, the home loan will be repaid in 103 months instead of 360 months. Here, the total interest paid will be around ₹15 Lakhs, saving you about ₹38.5 Lakhs in interest. (See Table 3)

3. Pay a Lump Sum Amount Annually:

   If you pay an additional lump sum amount towards the principal every year, you can also save a significant amount on interest. 

   For example, if you pay an additional ₹1 Lakh towards the principal every year, the loan will be repaid in 159 months. Here, the total interest paid will be ₹19.21 Lakhs, saving you about ₹34.77 Lakhs in interest. (See Table 4)

Try to follow the method that suits you best and aim to repay your home loan quickly.