A Home Loan means that you are in a long-term debt. This can be a strenuous phase for a borrower. Paying off the loan is time consuming and tormenting, making borrowers eagerly waiting to pay off the loan.

Mentioned below are a few tips on how to pay off the home loan faster and become a debt free homeowner:

Increase the EMI Payments –

Since home loans are usually long term in nature, it is safe to assume that a borrower’s income is likely to rise during the 15 – 30 year long tenure of the loan. Therefore, paying off a larger sum towards the EMI as and when you get a raise will help you close your home loan faster.

As a rule of thumb, a borrower must pay at least 40 – 50% of his income as Emi towards the home loan. Make sure to maintain this percentage as and when your salary rises. This will not only, as mentioned earlier, help you pay off the loan faster, but will also help replenish your credit score, making you more credit worthy for future loan applications.

One more method an individual can follow is to increase the EMI payments by 5% every month. This will seem to be a negligible part of your income, but will help you close off your home loan faster in the long run. In case this percentage is too high for you, increase the EMI payments to a lower percentage, but make sure you increase it as this will help you save on interest as well, apart from merely helping you close off your home loan.

Utilise any Additional Income You Receive –

An unexpected income you receive should be used to prepay your home loan, and if possible, preclose it too. Most of the lenders in the market do not charge an amount on preclosure; therefore, it is a wise decision to do so. This will help you save on interest while helping you rid the burden of the home loan simultaneously. However, it must be noted that if a bank or financial institution charges a preclosure fee, it should not overshadow the savings you may receive if you preclose the home loan. One must be wary of this because the intent of preclosing is to primarily save up on interest.

Use an EMI Calculator –

Several platforms online provide you with Home Loan EMI Calculator that enable you to gauge the monthly outflow you need to incur towards the home loan. This will help you assess your repayment capacity and help you gauge if you are capable of paying off the loan or not. If it is going to be a financial burden, it makes sense to nit get into a debt in the first place. As an alternative, you could dig into your savings and pay a larger portion of the down payment. This would mean that the loan amount would reduce, thereby reducing the EMI payable on the loan.

Refinance your Home Loan –

Refinancing your home loan is a good method to reduce interest rates. If your bank is not willing to reduce the interest rate on your home loan, you could refinance the loan with another bank. This will help you save on the total interest payable and in some cases help you pay off your loan faster as well. However, one must ensure that the savings he/she obtains from this process is negligible when compared to the fees you may have to pay in order to refinance the loan. Therefore, it is important to calculate all of the costs before choosing to refinance the loan.

Borrowers can request a lender to reduce the rates on interest on a particular home loan, and if the banker refuses to do so, a borrower can always choose to refinance the loan with another bank. Another aspect to keep in mind is the fact that the EMI for a home loan in the initial stages consists largely of the interest and lesser of the principal. During the later stages of the loan, this reverses and a borrower pays lesser interest and more principal. This means that it doesn’t make sense to refinance your loan at later stages of the home loan as this will not help you save any money.

Reassess Investments –

If your return on investments is lesser than the interest on your home loan, it would be a wise decision to pull out your investment and use it to prepay your home loan. Although investments are good, it does not make sense to keep them if you are earning returns lesser than the interest payable on your home loan.

Opt for a Shorter Tenure –

A shorter term on your home loan means that you pay a larger EMI. However, this also means that pay lesser total interest, which will help you save more money. This is an operative method in reducing the burden on your home loan repayment. And although short term home loans may attract a larger rates of interest when compared to long term home loans, the total interest payable will be lesser.

Renegotiate the Loan –

 If you have been a customer of a bank for a while, you should successfully be able to renegotiate the rate of interest on the home loan. Most banks will oblige merely because of the immense competition in the home loan market.

Although home loans can be torturous, it need not be. Following the steps mentioned in the article can help reduce the burden of repaying your home loan. Making larger EMI payment as and when you can, making wise decisions, and doing some research can help you close off your home loan without it having to be a burden.


By Vanshika Kumari
who is a financial writer who writes content on Home Loan Investment tips and information in India like Home Loan Interest Rate, Home Loan Eligibility, Home Loan Balance Transfer, Real Estate Sector and many more.

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