How to pay off your home loan faster? Just one trick can reduce your EMI in 5 years!

Home Loan EMI Reduction Tips: Getting a home loan is easy, but repaying it quickly is the biggest challenge. Paying EMIs can sometimes feel like a lifetime. But with just one clever trick, you can repay your home loan three to seven years faster. 

This method is considered quite practical, but most people don't follow it. Let's find out what this trick is and why it's so effective.

What is the trick to repay home loan quickly?

The trick is to prepay just one extra EMI each year. This trick is so effective because most banks deduct a significant amount of interest from you in the initial years of your home loan. 

Adding just one EMI each year directly impacts your principal, loan term, and total interest. It's just a little extra money, but the impact is significant.

How many years will the home loan be reduced by 1 extra EMI?

This depends on your loan amount and interest rate, but on average, it can reduce the loan term by 3-5 years for a 20-year loan and by 5-7 years for a 25-year loan. This can also result in total interest savings of up to ₹5-12 lakh. Just one EMI per year can be a significant benefit.

Where will the extra EMI come from to repay the home loan?

1. Take out an EMI as soon as your increment or bonus comes in. You can add extra money by withdrawing EMIs from your salary increases each year.
2. You can make prepayment directly after income tax refund.
3. Extra income received during festive seasons like New Year, Diwali, cash gifts can be converted into EMI.
4. You can withdraw EMIs in a year by removing unnecessary subscriptions worth Rs 500-1500.

Do banks allow extra EMI?

Almost all banks offer prepayment options. Just keep in mind that there are no prepayment charges on home loans (floating rate loans), and all you need to do is make a small request to the bank, and the extra EMI should always be added to the principal.

Is there any benefit in increasing EMI?

According to financial experts, if possible, consider increasing your EMI by 5 to 10%. This can also reduce your loan term by 2-3 years each year, but the easiest way is to pay one extra EMI. If you can't manage your monthly budget, try paying one extra EMI annually.

Disclaimer: The information provided in this article is for general financial education purposes only. It does not constitute financial, tax, or investment advice. 

Before making any home loan decisions, such as prepayment, increasing EMIs, or changing the loan structure, please consult your bank, financial advisor, or loan manager. Loan amounts, interest rates, income, and financial circumstances vary, so results may vary.