Who doesn’t want to own a dream home, right? Today, home ownership is possible due to financing from banks or financial institutions. The process is simple these days, but do you know reducing your home loan tenure can benefit you?
It’s a prolonged home loan myth that the longer the tenure, the lesser the EMI will be. But the reality is that reducing your home loan tenure can save you a significant amount that would otherwise go towards the interest rate.
In this blog, we will emphasise on how to reduce your home loan tenure. Let’s check out.
How to shorten the home loan duration:
Make partial payments
One of the most common ways to reduce your home loan tenure is to opt for a partial payment. Partial payments aim to decrease the principal amount, which automatically decreases the loan duration by many months.
Not only this, but you also save on interest rates since you have to pay for a shorter period.
Consult the lender to restructure the loan
After 2 to 4 years, you get a reset period for your home loan. During that period, you can request your lender to increase the amount paid towards EMI. This will significantly decrease your tenure. But before approaching the bank or the lender, ensure your income has increased over the period to accommodate additional amount to the EMI.
Make a large down payment
As per RBI’s guidelines, financial institutions and banks can cover only 70% to 80% of the total property cost. The borrower must pay the remaining amount as a down payment. A large down payment reduces both the rate of interest and the principal amount. So, it’s always better to make a large down payment for your residential flat in Lucknow or any other location.
Get an overdraft facility
Having an additional income is the best way to lower your tenure. With extra income at hand, you can ask your bank for an overdraft facility. This lets you put extra funds into the account along with your EMI payment plan. As long as you maintain this extra amount in the loan account, it is considered as a pre-payment towards your home loan principal. You can lower your home loan tenure with each additional payment you maintain towards your home loan.
Make a higher EMI payment
Another way to minimize your home loan tenure is by paying higher EMIs. You can significantly lower your duration and interest rates too.
Home loan transfer
Under the home loan transfer, you can move your outstanding balance to another bank. This option arrives when you get a lower interest rate than what your current lender provides. With it, you can shorten your loan tenure.
Conclusion
Sometimes, taking a few steps helps you lower your home loan tenure for good. A shorter tenure can also reduce your rate of interest. However, it depends on a borrower’s financial stability. Always consider your long-term financial goals and budget before opting for any of the earlier steps.
