Home loan and prepayment options to save interest

Purchasing a home is not only the realization of one's greatest desire in their lifetime, but it is, without a doubt, the most significant financial endeavor that one will do in their lifetime. A borrower's best interest is to prepay their house loan whenever possible. It is one of the most creative strategies to keep more cash in your pocket. To reduce the claim you pay on your home loan, you can either opt for home loan prepayment for the remaining balance or a portion.

Prepayment Tips/Creative Methods to Pay Off Your Mortgage Early

• Increasing the monthly installment amount by a predetermined amount each year is a wise strategy for prepaying a mortgage loan. When it comes to keeping their EMIs affordable over a more extended period, young borrowers still relatively early in their careers have little choice but to pay them for more extended periods. Check with your lender to see if there is a yearly increase option for the EMI payment amount.
• You also have the choice to prepay a predetermined sum at the end of each year. It may also allow you to pay off the debt before the end of its term.
• Making investments specifically to pay off a mortgage early, amassing a corpus, and then prepaying a portion of the loan is yet another option. You can invest in market-linked products or fixed-return instruments like bank fixed deposits, depending on the level of risk you are willing to take and the type of financial instrument you prefer.
• In addition, certain financial institutions offer mortgages with an overdraft account. With this option, the borrower can make additional deposits into the history beyond the EMI, which will be counted toward the prepayment of the home loan. When it is necessary, the surplus cash that has been left in the account can also be withdrawn. You can pre-close the loan sooner if that's what you're going for.
• Investing in a mutual fund through SIP can net you a large sum of profits. Investing in mutual funds might also help you save on tax. This enormous amount of money can very well be utilized for prepayment of home loan, which can shorten the duration by several years.

Pros of Prepaying Home Loan

• If you are getting close to retirement, consider prepaying your mortgage to eliminate liabilities and have a worry-free retirement.
• It may make more sense to prepay a home loan and save on interest payments rather than invest in fixed-income instruments, which give lower yields because banks charge more excellent interest rates for home loans than what you may earn on most financial products.

Summing it Up

Make sure you are familiar with the guidelines to prepay your home loan before executing any of the alternatives for early home loan repayment. If you have any questions, you should discuss them with your lender, and before moving further, you should ensure you fully understand all of the terms and circumstances.