Top Ways to Reduce Home Loan Tenure

Buying a new home in India is a big achievement and financial milestone. However, since the loan tenure extends for a couple of decades or even more, you would have to bear the repayment burden for a long time. The monthly payments, i.e., EMIs (equated monthly instalments), can strain your finances, especially if you would have to make these payments for 20-30 years.

However, there are effective ways to reduce both your home loan EMI and tenure, which can make managing your home loan much easier and more cost-effective. So, if you have recently availed of a home loan or are planning to apply for one soon, you can use the following strategies to reduce your home loan tenure.

Strategies to reduce your home loan tenure

Choose a shorter repayment tenure

If you are wondering how to reduce home loan tenure, one of the easiest ways is to opt for a repayment tenure while applying for the loan. Shorter tenure means your monthly payments will be higher. simultaneously, you can enjoy significant savings on your overall interest payments in the long run.

In addition, opting for a shorter repayment tenure can speed up the home loan repayment process and help you become debt-free sooner.

Make prepayment regularly

Prepayment essentially means making additional payments to repay the principal loan amount. So, if you have any surplus funds, like bonuses received from investments, tax refunds, etc, you can consider using the amount to make prepayments. This will help reduce your home loan tenure and the EMI.

Choose a step-up EMI plan

Generally, the home loan maximum tenure is 30 years. But, if you don’t want to bear the burden of making monthly payments for such a long time, you can reduce your home loan tenure by choosing a step-up EMI plan when applying for the loan.

The step-up EMI plans are specifically designed to align with your career progression and growth in income levels over time. In this type of EMI plan, the monthly payments are lower at the start of the loan term and gradually increase over time.

By choosing a step-up EMI plan, you can easily manage the monthly payments when your income is low at the start of your career and eventually afford to pay higher EMIs as your income increases. This simple strategy allows you to reduce home loan tenure and be debt-free sooner.

Make lumpsum payments periodically

Apart from partially prepaying the home loan periodically, you can consider making lumpsum payments occasionally whenever you have any surplus funds. Like the prepayments, every time you make a lump sum payment, your principal amount reduces to that extent, leading to significant savings on your interest payments and reducing your home loan tenure.

Consider refinancing the home loan

As you continue to pay your EMIs, you must keep abreast with the prevailing interest rates in the market. And, if you notice a significant drop in the interest rate compared to the interest rate you are paying currently, you can consider refinancing your loan to a new lender.

This can allow you to take advantage of lower interest rates and repay the balance amount at a lower interest rate, leading to lower EMIs and shorter repayment tenure.

Increase the EMI payments

If your financial situation allows you to make higher EMI payments, then you should increase the EMI periodically. This may seem like a minor step initially, but if you continue to pay higher EMIs from time to time, it can significantly impact reducing the loan tenure. Even a slight increase in the EMI payment can accelerate the repayment of the principal amount.

Use your bonuses strategically

Whenever you receive any surplus income in a year, like the annual bonus, or dividends from the investments, you can use the full amount for a part of it towards repaying your home loan. This strategic use of the funds can help you pay off the principal amount to a substantial extent, and you can reduce your home loan tenure.

Monitor and review your home loan statement periodically

Even as you make your monthly payments on time, you must not forget to occasionally review your home loan statement and the terms and conditions. Sometimes, the lender may offer special schemes to help you reduce your home loan interest rate and, eventually, the home loan tenure.

Staying informed about such opportunities can take advantage of them can work in your favour.

Take advantage of the tax benefits

Home loans come with a host of tax benefits. You can avail yourself of tax deductions on repayment of both principal and interest components. Make sure to leverage these benefits, and you can use the amount you save on taxes to prepay the loan or increase your EMI payments and reduce your home loan tenure.

Now that you know how to reduce home loan tenure, use the above to your advantage. To get a home loan at attractive interest rates and favourable repayment terms and conditions that align with your financial conditions, you can consider applying for a loan with Aditya Birla Housing Finance, starting from 8% per annum.