Jun 27, 2023

Find Tips to Reduce Home Loan Tenure in House Purchase

by Godrej Properties Limited

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Everyone aspires to possess their own residence. The process of constructing or buying a home holds great importance for the majority, and some individuals depend on a housing loan to finance it. Luckily, the era of saving up throughout one's lifetime to fulfill the dream of homeownership has long gone!

Home loans have facilitated early home purchases for individuals in their careers. These financial tools offer substantial funding and afford a comfortable repayment schedule. Although longer loan durations have their advantages, being knowledgeable about housing loan minimum tenure empowers you to minimize the overall interest paid. 

Here are a few tips that will help you reduce your home loan tenure and become debt free earlier: 

Tips for Shortening the Term of a Home Loan
 

If you wish to shorten the duration of your home loan, consider the following: 

1. Opt for Partial Prepayments

By making partial prepayments, you can decrease the principal amount, which in turn affects the loan duration while keeping your subsequent EMIs unchanged. Consistently making such payments can help you shorten the loan tenure by several months and save on interest.

2. Approach the Lender for Loan Restructuring

During the reset period of your home loan, you may have the opportunity to request the lender to lower the applicable tenure. As your income increases over time, consider asking the lender to increase your EMI amount, which will result in a shorter tenure. However, before approaching your lender to get a home loan minimum tenure, ensure that your income can accommodate the additional EMI responsibility.

3. Increase Your Down Payment

Lenders, as per RBI regulations, offer home loans covering 70%-80% of the property cost, while the remaining amount is expected to be financed by the borrower as a down payment. By increasing the size of your down payment, you can reduce both the principal loan amount and the interest on your monthly EMIs. 

4. Explore an Overdraft Facility

If you have a consistent surplus income, consider incorporating an overdraft facility into your home loan account. This allows you to deposit any extra funds into the account alongside your regular EMI payments. As long as the surplus amount remains in the home loan account, it serves as a pre-payment towards the principal. With each additional payment made to the home loan account, the overall principal amount decreases, leading to a reduction in both the interest charged and the loan tenure.

5. Increase Your EMI Amount

Making higher EMI payments than required is a simple strategy to reduce the maximum tenure of your home loan and, consequently, lower your interest expenses. By allocating surplus funds towards home loan EMIs, you can effectively decrease your debt burden. 

6. Loan Refinancing 

Loan refinancing provides an opportunity to reduce the loan term by switching to a new lender and negotiating better terms. It allows you to restructure the repayment duration according to your financial goals. This is an effective way to shorten the loan tenure. 

7. Home Loan Transfer

A home loan transfer refers to moving your outstanding balance from your current lender to a new one, often in pursuit of lower interest rates. Through a balance transfer, you can potentially shorten the home loan maximum tenure while keeping the same EMI amount. 

Which Should be Reduced, the EMI Or the tenure?
 

When it comes to picking between home loan prepayment, reduced EMI, or tenure, the decision depends on the borrower's circumstances. Lowering the EMI can ease monthly cash flow while reducing the tenure and saving up on interest payments. Consider your budget, long-term goals, and seek advice to make an informed choice.

 

FAQs
 

1. How can I lower my home loan interest rate?

To lower your home loan interest rate, you can negotiate with your lender for a reduced rate or consider refinancing with another lender offering better rates.

2. Can I reduce my EMI tenure?

Yes, you can reduce your EMI tenure by either increasing your EMI amount or making prepayments towards the principal. By doing so, you can get the best tenure for a home loan and even reduce the overall interest paid.

3. How to close a home loan in 10 years?
 

To close your home loan in 10 years, consider opting for a shorter housing loan tenure from the beginning. Make higher EMI payments, utilise any surplus funds to make prepayments, and avoid extending the loan duration.

4. Is it good to have long tenure for a home loan?
 

Having max tenure for a home loan can have its advantages, such as lower EMIs and improved affordability. However, getting the maximum possible tenure for a home loan also means paying more interest over time. 

5. How do I clear my loan before my tenure?
 

The answer to how to reduce home loan tenure is to increase your EMIs, make regular prepayments, and utilise any windfalls or additional income towards reducing the principal amount. 
 

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