How to Repay Home Loan Faster: Top Strategies | ICICI Bank

A Home Loan is a long-term liability of a significant amount and one of the key financial decisions in most people’s lives. Most Home Loan borrowers tend to opt for a long tenure so that they can repay the EMIs easily without stretching their budget. However, the longer the loan tenure, the higher the interest that you have to pay on your loan. Therefore, it is beneficial if the Home Loan is paid off as quickly as possible. Here are some strategies that you can use to repay your Home Loan faster and thus save on the interest payment.

1. Higher down payment

Usually, the down payment for a home can be up to 25% of the home value. If you have enough savings that can cover more than 25%, pay a higher down payment, so that your loan amount reduces. As a result, the interest to be paid will also get reduced.

2. Shorter loan tenure

Another option to repay your Home Loan faster is to opt for a shorter loan term. However, you will have to pay higher EMIs if you opt for a shorter loan tenure.

3. Partial pre-payment of loan

One of the easiest ways to repay a Home Loan faster is to make partial pre-payments if you have surplus money. Making a partial pre-payment helps in bringing down the outstanding loan amount and thereby the interest to be paid, since interest is calculated on the outstanding loan amount.

4. Make use of tax exemptions

If you are looking to reduce the cost of a Home Loan, make use of various tax deductions available under the Income Tax (IT) Act. As per Section 80C (under the old tax regime), you can claim tax deduction up to ₹ 1.5 lakh in a financial year on the amount paid towards repayment of the principal amount of a Home Loan. Also, under Section 24(b), you can claim tax deductions on the interest amount paid on a Home Loan up to ₹ 2 lakh in a financial year. There are other tax benefits available on specific types of homes and home loans, so do your research and make the most of available tax perks.

Why You Should Focus on Repaying Your Home Loan Faster

Paying off your Home Loan early can help you save a lot on the interest, especially since Home Loans in India usually run for many years. The longer the loan tenure, the more interest you end up paying.

By repaying faster, you reduce your interest burden and free up money for other goals like your child’s education, travel or investments. Repaying your Home Loan faster also improves your credit score. If possible, try to increase your EMIs or make part pre-payments- even small amounts make a difference.

In short, repaying your Home Loan early gives you more financial freedom and peace of mind. Do make sure that you check with your lender before making a part-payment or foreclosing the loan, as the same may attract applicable charges.

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