News India Live, Digital Desk: Home Loan Prepayment: Buying your home is a big dream of everyone. To fulfill this dream, we often take a long home loan of 20-25 years. Every month, while repaying EMI, I wish that I wish! This debt ends quickly.
The good news is that it is possible! A smart way to this is- Home loan prepamentIn simple language, paying more money than your fixed EMI. But the biggest question is when to do this prepament so that you get the most benefit from it? Come, today let’s understand this secret in easy words.
What is home loan prepament?
Whenever you have a lump sum money from a bonus, increase or any other source, you can pay some part of your home loan with that money. This is called ‘prepament’. This not only reduces your principal amount, but also reduces the loan duration and you can save the interest of millions of rupees.
What is the ‘Golden Time’ to do prepament?
This is the biggest secret of this game. You get the most benefit of home loan preparation when you Early years Do it in
Why is there a ‘masterstroke’ in the initial years?
To understand this, you have to understand the mathematics of your EMI.
When your home loan starts, a large part of your EMI Interest As the bank goes to the bank and a very small portion Principal It accumulates in
For example: If your EMI is ₹ 25,000, then in the initial years, it may be ₹ 20,000 interest and only ₹ 5,000 is reducing your principal.
In such a situation, when you prepare in the beginning, then that money directly your Principal amount Reduces Due to low principal, the entire interest of the future on it is automatically reduced. This a small step gives you millions of rupees.
What happens with preparation in the last years?
As your loan gets old, EMI mathematics turns upside down. Now a large part of your EMI Principal amount Goes to repay and the share of interest is very low. If you prepare at this time, then it saves interest, but not as much as it would be at the beginning. This is because you have already paid most interests.
What to keep in mind?
Prepayment Charge: Although there is no prepament charge on home loans with floating rate, but still ask your bank about the terms and conditions.
At least how much amount: You can deposit any amount as a prepament as per your convenience. Doing this even once a year makes a big difference.
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