Paying off a home loan effectively is about making every rupee count. A well-planned strategy becomes crucial to minimise both the time taken to repay and the overall interest costs. If you’ve ever felt unsure about whether you're paying more than necessary or wondered how to plan better, this guide is for you.
You'll learn how to create a home loan repayment plan that aligns with your income, understand how to use tools like a home loan EMI calculator effectively, and explore simple tactics to stay in control of your repayment journey.

Understanding the Home Loan Repayment Structure

Your monthly repayment is made up of two key components: the principal and the interest. In the initial years, a larger portion of your EMI goes towards interest repayment, while the share allocated to the principal gradually increases over time.
That’s why it’s important to understand your amortisation schedule – a breakdown of how your loan is repaid over the tenure. This detailed visualisation helps you track how much interest you’re paying monthly or annually. With this insight, you can evaluate whether strategies like prepaying part of the loan or adjusting your tenure could help reduce your overall interest burden.

Repayment Plan For Your Home Loan – 5 Smart Strategies

1. Use a Home Loan EMI Calculator Before Deciding Anything

Before committing to any home loan, start with a home loan EMI calculator. This easy-to-use online tool lets you test different combinations of:

• Loan amount
• Tenure
• Interest rate

By adjusting these variables, you can estimate your monthly EMI and check whether it fits within your financial comfort zone.
For instance, a loan of INR 40 lakhs at an interest rate of 10% p.a. for 20 years results in an EMI of approximately INR 38,601. The same loan over 15 years gives an EMI of around INR 42,984.
This clarity helps you avoid surprises and plan for future goals like your child’s education or retirement savings.
Note: The EMI calculator does not factor in value-added services such as insurance that you may have opted for along with the loan.

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2. Make Prepayments Whenever Feasible

Prepaying even a small portion of your home loan can have a significant impact over time, especially in terms of reducing the overall interest paid. You can use windfalls, bonuses, or tax refunds to make prepayments.
It is important to check whether your lender charges any prepayment penalties. As per RBI guidelines, there is no penalty on prepayments for floating-rate home loans taken for non-business purposes. Fixed-rate loans may still attract charges, depending on the lender’s policies.

3. Consider Balance Transfer If You’re Paying a Higher Interest Rate

If you're locked into a higher home loan interest rate and find another lender offering a significantly lower one, transferring your outstanding balance could be beneficial.

• Check for any foreclosure charges, processing fees, and switching costs to ensure the transfer is viable.
• Evaluate how much interest you can potentially save over the remaining tenure. If the net benefit outweighs any costs involved in the balance transfer, it can ease your repayment burden and help you save in the long term.

4. Consider a Shorter Home Loan Tenure

It is natural to lean towards lower EMIs to reduce the monthly burden, but longer tenures can also result in higher overall interest costs. Shorter tenures, while slightly increasing EMIs, can not only reduce the total interest paid but also help you become debt-free faster.
Let’s take the same example from before. For a 20-year tenure, the total interest costs are around INR 52,64,208, while they are around INR 37,37,157 for a 15-year tenure.

5. Automate EMI Payments and Monitor Progress Periodically

Late or missed EMIs can hurt your credit score. Set up auto-debit instructions to ensure timely payments and protect your credit health. Also:

• Review your amortisation schedule every few months to track progress.
• Celebrate small milestones, like reducing the principal by 25%, to stay motivated.

Proactively managing your home loan repayment plan helps you stay in control and plan future investments confidently.

Conclusion

A strong repayment plan for a home loan starts with understanding your finances, staying disciplined, and making use of smart tools to guide your decisions. With a long-term commitment like a home loan, even small steps – such as making prepayments when possible, adjusting the tenure, or opting for a balance transfer – can lead to significant savings over time.
If you’re ready to move forward in your homeownership journey, SMFG Grihashakti offers home loans of up to INR 1 crore* at interest rates starting from just 10%* per annum. Estimate your borrowing capacity using our home loan eligibility calculator and apply online today!