You can save 28 Lakhs while paying a Rs 50 Lakhs home loan 🤯
Let’s find out how ⤵️
Let’s find out how ⤵️
Buying your own house is the best feeling especially when you have been paying rent for a very long time.
Also people feel it's better to pay home loan EMI than to pay rent to a landlord, as at the end of the loan tenure, you get the ownership of your dream home! 🏠
Also people feel it's better to pay home loan EMI than to pay rent to a landlord, as at the end of the loan tenure, you get the ownership of your dream home! 🏠
But, by the time u repay ur home loan, the interest cost runs into a sizable amt, sometimes 2x of your principal!
For e.g.: A loan of 50 Lakhs will cost you ~ 1 Crore incl. interest of 50.37 Lakhs (assuming 8% int. rate & 20 yrs tenure).
Then how to pay the loan effectively? 🤔
For e.g.: A loan of 50 Lakhs will cost you ~ 1 Crore incl. interest of 50.37 Lakhs (assuming 8% int. rate & 20 yrs tenure).
Then how to pay the loan effectively? 🤔
Options to reduce your home loan burden:
• Go for a lender that offers you the lowest interest rate.
You can enquire about the rates from 2-3 banks and then decide. If you already have a home loan, you may switch to another low-interest lender or ask your lender to lower it.
• Go for a lender that offers you the lowest interest rate.
You can enquire about the rates from 2-3 banks and then decide. If you already have a home loan, you may switch to another low-interest lender or ask your lender to lower it.
While home loan interest rates used to be linked to MCLR earlier, now most banks are offering these loans at a rate called RLLR (linked to RBI's repo rate)
RLLR-linked rates < MCLR-linked rates
If your loan is linked to MCLR, you can switch to RLLR ✅
RLLR-linked rates < MCLR-linked rates
If your loan is linked to MCLR, you can switch to RLLR ✅
• Plan a prepayment strategy
Generally, the criteria that banks follow while lending is your EMI to income ratio i.e. maximum 40-45%
But if you can save more, it’s better to prepay some amount at regular intervals ⤵️
Generally, the criteria that banks follow while lending is your EMI to income ratio i.e. maximum 40-45%
But if you can save more, it’s better to prepay some amount at regular intervals ⤵️
For instance -
Loan amount: ₹ 50 lakh
Rate of interest: 8%
Actual tenure: 20 years
Current EMI: ₹ 41,822
Repayment amount: ₹ 1,00,37,281
Loan amount: ₹ 50 lakh
Rate of interest: 8%
Actual tenure: 20 years
Current EMI: ₹ 41,822
Repayment amount: ₹ 1,00,37,281
Now, assuming a prepayment of ₹ 20k per month -
Revised tenure: 9 years
Revised repayment amount: ₹ 72,08,487
Years saved: 11 years
Interest saved: ₹ 28,28,794 🤩
#personalfinance
Revised tenure: 9 years
Revised repayment amount: ₹ 72,08,487
Years saved: 11 years
Interest saved: ₹ 28,28,794 🤩
#personalfinance
How to do it? 🤔
• Set aside a certain sum either monthly or annually.
• The interest portion in EMI is more in the initial years of the loan. So, prepaying in the initial 1-5 years can help you save a few lakhs of the loan amount.
• Set aside a certain sum either monthly or annually.
• The interest portion in EMI is more in the initial years of the loan. So, prepaying in the initial 1-5 years can help you save a few lakhs of the loan amount.
• Try to cut down on some discretionary household expenses like movies or dinner outings, vacations etc.
• Any bonus or increment that you may receive may also be used to repay the home loan outstanding.
• Any bonus or increment that you may receive may also be used to repay the home loan outstanding.
• If any of your investments generate lower interest compared to the home loan rate, you can redirect that to loan repayment.
Before planning the repayment strategy, make sure that:
• You have adequate emergency funds 🧯
• Other savings earmarked for your long term goals such as children’s education and retirement 💰
• Adequate insurance 🛡️
• You have adequate emergency funds 🧯
• Other savings earmarked for your long term goals such as children’s education and retirement 💰
• Adequate insurance 🛡️
Check if you are in line to buy your dream house or if you are already burdened with debt and make all preliminary checks (like emergency fund, insurance, etc) ...all of this, only at Recipe.finology.in
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