Accelerate To Financial Freedom: How To Repay Home Loan Faster?

Do you find yourself thinking about how to repay home loan faster? You are in the right place if you often resonate with this question. Pursuing a life free from financial stress is not just a financial goal but a transformative journey to financial freedom. Home loan repayment seems like a maze where interest and principal dance a complex tango. Understanding the moves of this dance becomes challenging for a longer duration. It is where a home loan will feel like a burden to you. Therefore, it is crucial to understand the basics of loan repayment. 

Understanding the dynamics of home loans is the first and most crucial step toward financial empowerment. Loan is just one term to several intricate details that work together. If you wish to expedite the repayment process of your loan, it is essential to understand these intricate details. After understanding these details, the next step is to find ways to repay your home loan faster to minimise the interest. From adopting accelerated payment schedules to voluntarily increasing your Equated Monthly Instalments (EMI), there are several ways you can adopt to reduce the amount of interest you pay. 

To help you pay your home loan faster, the Home4us team has an all-in-one blog containing the go-to tips. This blog is not just a set of guidelines but your companion on your journey to financial liberation. It will share the most practical advice and expert insights, offering a roadmap to break free from the tangles of a lengthy home loan. At the end of this post, you can imagine the satisfaction of holding a mortgage-free title. So, start reading below.

Most effective tips to repay home loan faster

This post segment presents the most effective tips to expedite your journey toward a loan-free life. So, let's delve into the specifics and equip you with all the knowledge you need to make swift progress toward your financial liberation. 

Research and compare options

The first tip in this guide sharing knowledge on how to repay home loans faster is choosing your lender and planning wisely after exploring several options. For in-home loans, the interest rate you secure is crucial in deciding the repayment journey. Therefore, conducting thorough research to compare all the loan options and identify the one with the lowest interest rate is significant. Opting for a loan plan with a lower interest rate safeguards your financial interests and allows you to accumulate surplus funds. 

A thorough research will help you choose a loan plan with a lower interest rate and allow you to set the stage for long-term savings. These funds will eventually help you expedite your home loan repayment. Hence, every penny you save in interest payments will strategically be directed towards reducing your principal amount and ultimately help you become mortgage-free.

Choose a short repayment tenure

Another expert tip is to opt for a short repayment tenure when securing a home loan. It will significantly assist you in expediting the loan repayment process while offering several financial advantages. Choosing a short term leads to a more aggressive repayment schedule, resulting in a quicker principal amount reduction. In addition, it reduces the overall interest payments over the life of the loan. When you choose a compressed repayment period, you mitigate the impact of compounding interest. As a result, you will pay less compared to a more extended loan term. 

In addition to the above-listed advantages, like faster loan repayment and fewer interest payments, a short repayment tenure also shields you from interest rate fluctuations. Longer loan terms expose the borrowers to the risk of increasing interest rates. But, with compressed loan tenure, this vulnerability is reduced. So, to accelerate your journey towards becoming a debt-free homeowner, you must choose a short repayment tenure. 

Paying a down payment more than 20%

You can also consider paying a sizable down payment that exceeds 20% (more than customarily paid). Paying a down payment of more than 20% will help repay your home loan faster, substantially reducing the principal loan amount. As the borrowed amount will be less, it will lead to a reduction in the monthly payments. A smaller loan amount will also assist you with more funds for each payment, leading to quicker removal of the outstanding principal amount. Eventually, it will shorten the loan term and minimise the total interest paid. 

Choosing to pay a sizable down payment might also result in a lower interest rate. Seeing the financial stability and commitment of the borrowers, lenders often offer more favourable repayment terms. All these factors together work to make the repayment process faster and more efficient. A sizable down payment helps you to keep yourself disciplined towards loan repayment, as paying a large amount upfront will keep you committed to prioritising the repayment and adopting prudent financial habits.

Choose a Home Loan Balance Transfer facility

Next on the list of tips on how to repay home loans faster is that you must opt for a Home Loan Balance Transfer (HLBT) facility. Doing so is a strategic financial move as it allows you to transfer the home loan to another lender who might be offering more favourable terms like better repayment options and lower interest rates. As a result, by choosing the HLBT facility, you can reduce the overall interest outgo and monthly EMIs. Another benefit of choosing this facility is that it results in substantial interest savings by lowering the interest rates. 

Additionally, the freedom of switching to another lender will empower you to align the repayment strategy with your financial goals and liquidity, resulting in quicker debt clearance. Therefore, an HLBT facility will reduce your financial burden and make your debt-free homeownership journey swift. However, analysing the terms and costs associated with a loan transfer is crucial to ensure that the benefits outweigh any potential drawbacks. 

Game up with interest rate negotiation

Financial experts also suggest that negotiating the interest rates with the lender can significantly influence the pace of loan repayment. The interest rate applied on a home loan is a crucial determinant of the total loan cost, and even a slight reduction can result in significant savings over the life of the loan. Hence, it would help if you skillfully negotiated the interest rates to decrease the overall burden of paying hefty interest amounts. With lower interest rates, a more significant portion of each monthly payment will be directed toward the principal amount, accelerating the repayment process and minimising the long-term financial burden. 

Saving interest payments with lower rates will also help you make extra payments towards the principal amount and quickly decrease the outstanding balance. Therefore, to accelerate your home loan repayment process, you must use your negotiation skills wisely with the lender for lower interest rates.

Use the available tax benefits

Leveraging tax benefits on your home loan is another significant tip to expedite repayment. The Government offers several tax benefits to encourage homeownership. Hence, understanding and utilising these advantages is essential as they can significantly impact your financial journey. The different sections of the Income Tax Act 1961 offer homeowners several tax benefits. For example, Section 80C allows you to claim up to INR 1.5 lakhs as a deduction for the principal repaid in a year. You can also claim a deduction of up to INR 2 lakhs under Section 24 for the interest repaid. 

You can save a lot in taxes and reduce the repayment amount by availing the deductions. Over the years, this saved amount will help you prepay the loan entirely or at least partially and reduce the remaining repayment tenure. Prepaying the loan amount will reduce the principal outstanding amount and result in lower interest accrued over time.

Take a small loan

Borrowing a small loan to repay the home loan is another effective strategy to accelerate the repayment. Taking a loan when you are already in debt from a home loan is counterintuitive. However, there are certain small loans you can consider taking to optimise your financial efficiency. For example, in addition to a home loan, you can take a well-managed personal loan with a lower interest rate to repay the home loan by making additional payments towards the principal mortgage amount. Such a financial strategy of channelling small loans towards the home loan will help you reduce the overall interest paid. 

Taking small loans enables you to make lump-sum payments to shorten the repayment period. With the help of such loans, you can also pay off higher-interest portions of the home loan. Moreover, these small loans have an aggressive repayment schedule, encouraging timely settlements and fostering financial discipline. But, you always need to be extra cautious when adopting this approach to accelerate home loan repayment to ensure that the terms of the small loans are favourable for your financial goals.

Select a loan variant that allows an increase in the EMI amount

Another way to repay your home loan faster is to choose a loan variant that allows you to increase the EMI amount during the repayment period. This financial strategy will enable you to make larger monthly payments in the future when you can afford it and save on interest costs in the long run. The flexibility of increasing EMIs empowers you to align the repayment schedule with your financial growth over time. Therefore, as your income increases, you can channel surplus funds towards higher EMIs to lower the overall interest burden. 

Home loans usually run for a long time, and over this time, your income will increase, which will empower you to pay higher EMIs in the future. Therefore, paying lower EMIs and repaying your loan for a longer tenure is useless, even if you can easily afford to repay it faster. By opting for a home loan variant with the flexibility to increase EMIs, borrowers save on interest costs and achieve their dream of homeownership with greater efficiency and speed. 

Do not delay your payments

Paying the EMIs on time is another way to ensure a quicker repayment of your loan. Timely payments make your repayment process efficient and foster a positive financial trajectory. The consistent and punctual EMI payments result in a positive credit history that will enhance your credit score. A higher credit score shows your financial stability and helps lenders know that you are financially responsible, eventually leading to better loan options in the future. 

Another advantage of paying the EMIs timely is that the overall interest burden will be reduced. Paying the EMIs timely will reduce the outstanding principal amount and the interest, allowing you to repay the borrowed amount faster. It will help you stay on track to repay your home loan within the stipulated time frame.

Make part-prepayment

Making part prepayments on a home loan significantly helps to accelerate loan repayment. Therefore, if you are looking for ways on how to repay home loan faster, you must consider making part prepayments. When you do so, the outstanding loan amount is significantly reduced. This reduction lowers the interest needed to be paid over the loan tenure. By making periodic part prepayments, the borrowers can save substantially on interest because interest is calculated on the remaining outstanding principal, and part prepayments will reduce both these amounts simultaneously. 

Part prepayments of the loan help pay a home loan faster and offer peace of mind by mitigating financial stress and enhancing financial security. With a reduced debt burden, you will gain significant financial freedom and flexibility to allocate your resources to other important things. Therefore, if you wish to achieve homeownership more expeditiously, consider making part prepayments whenever possible. 

Wrapping up

A home loan is a great financial tool to become a homeowner quickly. It allows you to have the house of your dreams without financial stress. But, a common question home loan borrowers ask is- how to repay home loan faster. If you think about the same, use the tips listed in this blog to accelerate your home loan repayment and become a debt-free homeowner.

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