Home Loan: This way you can save Rs 28 lakh on a home loan of Rs 40 lakh, know this solid method today..

Buying a house is everyone's dream, but the home loan taken to buy a house has to be repaid for many years, which increases the interest burden significantly. Due to the long tenure of the home loan, the total interest amount becomes very high. But if you work a little wisely, you can save a lot in interest and get a chance to repay the loan early. Let's know how…

The magic of pre-payment
When you take a home loan, you pay EMI every month. But if you make some extra money, i.e., partial pre-payment from time to time, then your loan can be over quickly, and you also save a lot in interest. Partial prepayment means that apart from your regular EMI, you pay some extra amount to the bank once a year or after some time. This reduces your outstanding loan, and the total amount of interest also reduces.

Calculation to save 28 lakhs

Suppose you have taken a floating rate home loan of Rs 40 lakh, with an interest rate of 8.5% and a tenure of 25 years. Your monthly EMI will be around Rs 32,209. If you pay only regular EMIs, then in the entire 25 years, you will have to pay a total of Rs 56.63 lakh in interest.

But if you pay an additional Rs 50,000 annually from the second year of the loan, your loan tenure will be reduced by 7 years to around 18 years, and the interest savings will be around Rs 18.77 lakh. Now, if you pay an additional Rs 1 lakh annually, the loan will be over in about 14 years, and the interest savings will reach around Rs 27.58 lakh.

Benefits of pre-payment in a floating-rate home loan
A floating interest rate is the interest rate that keeps changing depending on the market conditions. The biggest advantage of a floating rate home loan is that you can make partial or full prepayment at any time without any penalty. This means that whenever you have extra money, you can use it to reduce the outstanding loan amount. This will reduce your interest burden and the loan will be over sooner.

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