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What is the Best Way To "Get Rid Of" Or Pay Off a Home Loan?

Updated: Mar 21, 2022
What is the best way to get rid of or pay off a home loan

Your dream becomes a reality when you purchase a brand new home. That is the good part of the experience. The reality of buying a home is also committing to a huge financial outflow. Only a select few can make an outright property purchase. For the masses, it is back to the good old home loan.

With innovations in the finance sector, processes of availing the home loan have become much more streamlined. But you start to realize the enormity of what you have undertaken once you start with your home loan monthly repayments.

It may be alright at first because you are still basking in the joyous experience of purchasing a home. But as the months start rolling into tears of repayments, there will come a time when you think if you can get rid of a home loan quickly.

Best Ways to Repay your Home Loan Quickly

You have several options that can help to pay your home loan faster and shave off months, perhaps years off your repayment tenure. Let’s take a look at the four most convenient routes to achieve this goal.

1. Make More Frequent Payments on your Home Loan:

A home loan typically comes with a repayment tenure of anywhere between 10 to 30 years. For a single purchase, that is a really long time to service a loan without fail on your payment even for a single month.

If you really think you should get out of this commitment within a reasonable period of time, then it is wise to go with the shortest repayment tenure. In most cases, this is a period of 10 years. However, this is only possible if you have the adequate financial wherewithal to take on monthly installments that will be on the higher side. This will keep you on track to get rid of your home loan in a decade’s time.

That said, this option will be viable if only you have enough leeway to manage a higher EMI whilst still meeting all your monthly financial obligations in your current income. However, if you are indeed able to comply, then you save not just on time but on overall interest payment on the home loan too.

2. Make a Bigger Down-payment Combined with a High Monthly Instalment:

For middle-class families, purchasing a property is an expensive undertaking. Most will opt for a home loan to fulfil this dream. Having said that, you cannot finance the purchase of the property entirely through the home loan alone.

The lender will finance up to 90% of the market value of the property, depending on your eligibility. The rest of the amount has to be borne by the applicant directly. This is referred to as a down payment which is generally around 10% to 30%.

You can speak to your property developer and go with a higher down payment amount than the minimum requirement. For example, if you choose to pay around 35% of the property price at the very onset, then you may go with a lower home loan amount.

The debt obligation being on the lower side makes the monthly repayments a lot more economical on the pocket. Couple the higher down payment on the home with a shorter repayment tenure and you are all set to pay the home loan early.

3. Balance Transfer Your Home Loan with Another Lender on a Lower Interest Rate:

You may have availed the home loan from one lender but that does not in any way prohibit you from getting a better home loan offer with another lender. This is known as the balance transfer of your home loan.

Typically, the new lender will offer you a better rate of interest than what you are currently paying. There may be other benefits involved if you go through with the transaction. To ensure that you pay the home loan before time, you may opt for a shorter repayment tenure with your lower rate of interest.

This may translate into a monthly instalment which may be the same as what you were paying before, maybe even slightly higher. However, if you can continue with your monthly payment at a similar range, you can indeed get rid of a home loan a lot faster than you originally anticipated.

4. Use Unexpected Earnings to Make Part Payments on Your Home Loan

Home loan prepayment is an ideal route to paying off your financial obligation quickly if you do not wish to commit to a scheduled part payment model. This works out well without disturbing your budget for monthly expenses if you know if you will have access to surplus funds across specific times in a year.

If you compare this method of paying off your home loan quickly with the other three routes, it may not look as structured and well defined. Having said that, this is the only way that offers borrowers the convenience and flexibility of payment.

That said, you should check with your lending partner if making ad hoc payments one or more times during a financial year will attract a penalty fee or charge. If not, then this is the strategy that you should certainly opt for. Remember to inform your lending partner that you will be making part payments on the home loan at certain times during the year.

Availing home loans and repaying them through affordable monthly instalments ensures that your dream home does not become a burden on your pocket. As a matter of fact, with longer repayment tenures you can have leftover funds from your earnings. These funds can be then channelised towards financial instruments that offer potentially higher returns.

In the long run, this helps in compounding your savings, thus helping the borrower in wealth creation and accumulation.

A Home Loan Guarantees Property Safety:

When you purchase a property, it is important to make sure that the investment is free of any legal disputes. However, for an ordinary borrower, running a check of this magnitude can be overwhelming.

This is an added home loan benefit for salaried and self-employed individuals as availing this type of finance automatically triggers a full background check on the credibility of the builder as well as the property itself. The chosen lender undertakes this exercise on behalf of the borrower. The outcome is to make sure that the property is legal, and the real estate developer has all the necessary documentation and certificates from the relevant authorities. Once the lender receives a positive report, the borrower is absolutely assured that the property is free of any legal disputes making it a safe purchase.

Final Thoughts

Paying off your home loan quickly comes with a number of benefits. The most important of which is having that extra money to invest. This can be in the form of a retirement fund, setting up a corpus for your children’s higher education, marriage or even financing a luxury vacation.

Therefore, if you are an existing customer at Grihashakti and wish to know more about how to get rid of a home loan, feel free to speak to a home loan specialist on the toll free number 1800 102 1003, Monday to Saturday, between 9.30 a.m. to 6.30 p.m to get a better understanding of the process.

Must Read : Tips To Make Home Buying Process Less Overwhelming

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