What are some tips to save money on home loan repayment?

Posted on Thursday, January 12th, 2023 | By IndusInd Bank

Buying a house is one of the biggest aspirations in our lives. For most of us, home loan is the only way to achieve this dream. While availing a home loan does not take as long; repayment of home loan is a lengthy affair – especially if the EMI is low and spread across a long tenure. But that should not stop you from saving money or investing.

Repaying your home loan can become a chronic financial stress if not done in a planned manner. Here, we will discuss a few strategies that can help you save money on your home loan repayment.

But, there are a lot of things that you consider before buying a house, such as the location, the direction of the house, the neighborhood, the quality of construction and lots more. Similarly, you should inspect several possibilities before availing a home loan that make loan repayment easier for you. Here are a few things you can do to save more on the home loan before finalizing it:

1. Make bigger down payment – The bigger down payment you make, the smaller your total loan amount will be. Consequently, the amount on which you have to pay interest will also be smaller. For instance, if the total value of a house is Rs. 90 lakhs and you make a down payment of Rs. 15 lakhs, then you will be paying interest on Rs. 75 lakhs. But if you increase the down payment to Rs. 30 lakhs, then the amount on which you have to pay interest will reduce to Rs. 60 lakhs.

Additionally, bigger down payment also means that the monthly payments or EMIs will be lower. If may be difficult to pay a huge sum up-front, but it will ease the remaining of your loan repayment journey.

2. Select a comfortable tenure – It may seem like a good idea to get a smaller loan tenure with bigger EMIs and repay your loan quickly. But if you fail to keep up with the big monthly installments, you may find yourself in a debt trap. You will end up losing money instead of saving or investing. Use a home loan EMI calculator to pick a comfortable loan tenure that makes repayment stress-free, and leaves funds for unforeseeable circumstances.

3. Compare interest rates – Take ample amount of time while browsing through different lenders. Apart from the interest rate, also look for facilities like loan top-up, flexible tenure etc. Since the interest rate directly determines the cost of your home loan, IndusInd Bank offers attractive interest rates that make loan repayment a stress-free journey.

4. Invest: Rather than keeping your savings dormant, you can build your wealth by investing in products with high returns – such as IndusInd Bank Fixed Deposit. Later, you can withdraw your earnings to make bigger down payment.

Once you have availed a home loan, you can save money during the loan repayment by:

1. Availing tax deductions on home loan interest – You can avail income tax deductions on the interest paid under section 24(B) of the Income Tax Act to reduce your total tax outgo. A maximum of 2 Lakh per annum can be claimed from your gross annual income.

2. Switch to a bank with lower interest rate – After taking the loan, if you feel that your existing bank is charging a higher interest rate than others, you should try to shift your home loan to a different bank. You can transfer your existing home loan with IndusInd Bank without any hassle and enjoy attractive interest rates on your home loan.

3. Invest the remaining income – If the interest rate on your savings is higher than your home loan interest rate, you should invest the money that is left after taking care of your monthly EMI. The difference between the investment returns and home loan interest will help you build additional wealth.

Conclusion:

Your home loan is likely to be one of your biggest expenses. You can save lots of money on your loan repayment if you actively manage your funds. While cutting back on expenses definitely help you save money during this period, following the above-mentioned strategies will greatly reduce the burden and stress you might feel while repaying your home loan.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision.  IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.