Increasing your home loan EMI by ₹5,000 can save you over ₹26 lakh in interest and shorten your loan tenure by 7.5 years. With the Reserve Bank of India reducing the repo rate by 25 basis points, home loan interest rates have dropped. Instead of reducing your EMI, keep it unchanged to benefit from lower interest payments.
For example, if you have a 20-year loan at 8.5% interest and the rate drops to 8.25%, you can save ₹8,114 per lakh by maintaining your EMI. This is significantly higher than the ₹3,472 saved by reducing the EMI. By increasing your EMI by ₹5,000, you can reduce your loan tenure from 25 years to just over 17 years, resulting in 92 fewer EMIs.
Additionally, with income tax cuts and annual raises, you may have extra funds to increase your EMI or make part-prepayments. A one-time prepayment of ₹50,000 can further reduce your loan tenure by five EMIs. Using these strategies, you can save a substantial amount on interest and pay off your loan faster.
Experts recommend using the extra funds from tax savings and bonuses to reduce your loan burden and achieve financial freedom sooner.
