Remember, the more time you take to repay your home loan, the more interest you will need to pay. In order to avoid this, you should try to decrease your loan tenor whenever possible.
Let us say that you bought a house a couple of years back, for which you took a home loan of Rs. 50 lakh at 11% interest. Your loan tenor was 20 years, and your EMI amount was Rs. 51,610. Banks routinely change the home loan interest rate depending upon the current RBI guidelines. Let us assume that your bank chooses to slice rates to 10.75% today. This means your EMI will be decreased to Rs. 50,671.
If you keep on paying the first EMI (Rs. 51,610), you can lessen your loan tenor by 1 year, as you will end up repaying your loan sooner, and will also save Rs. 6.71 lakh on interest cost. All you have to do is keep paying a marginally higher EMI.
To calculate how much EMI you will need to pay to end the loan during your desired tenor, use our home loan EMI calculator.
