Prepaying Home Loan : Owning a home represents not just a lifelong dream, but also a substantial financial commitment that individuals take on. For many homeowners, the vision of paying off their mortgages ahead of schedule and liberating themselves from the grasp of debt is a compelling aspiration.
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The Advantages of Prepaying Home Loan.
Jetaish Gupta, the Co-Founder & Director of Adore Group, emphasizes one exceptional strategy for achieving this objective: making principle Prepaying Home Loan.
When you decide to make regular monthly payments on your home loan, a significant portion of the initial installments primarily covers the interest, while a smaller fraction goes towards the principal.
However, as the loan term progresses, this dynamic shifts, allocating a greater share of each installment towards the principal. By incorporating extra principle payments, you have the power to expedite the repayment process and substantially curtail the overall interest paid.
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During the initial stages of your home loan, the interest component holds more weight, gradually diminishing over time. Amit Gupta, the MD of SAG Infotech, elaborates, “Through prepayment, the principal amount decreases, leading to reduced interest calculations in subsequent months. This approach expedites loan repayment and alleviates the burden of interest.”
In the context of floating-rate loans, prepayment typically comes without any additional fees. Conversely, fixed-rate loans might incur charges for prepayment. Gupta further adds that this strategic maneuver, which segregates EMIs into portions with lower interest and higher principal, effectively contributes to diminishing interest and expediting principal repayment.
Charting the Course to Financial Autonomy
Prepayment holds the potential to accelerate the completion of your loan, representing a favorable yet often disregarded option. The decision to make prepayments is contingent on individual financial circumstances. Amit Gupta recommends that considerable loan amounts featuring high interest rates might warrant prepayment, while loans with lower rates coupled with tax benefits could validate the decision to retain the loan.
“Visualize the sense of liberation from mortgage payments over an extended period. A shortened loan term not only provides financial autonomy but also bestows peace of mind, enabling homeowners to channel their focus exclusively towards other paramount life objectives,” elucidates Subhash Goel, the Director of Goel Ganga Developments.
While the allure of months without EMIs and the alleviation of debt is certainly tempting, its feasibility rests on individual circumstances. Before resorting to emergency funds, a thorough assessment of funding sources, bonuses, and savings is imperative.
In parallel, the Reserve Bank of India (RBI) has issued comprehensive guidelines for recalibrating floating-interest rates on Equated Monthly Instalment (EMI)-based personal loans. RBI stipulates, “Any adjustments in the EMI, tenure, or both resulting from this change shall be promptly communicated to the borrower through appropriate channels.”
On the journey towards attaining a life free from mortgage constraints, the strategy of making prepayments on a home loan emerges as a potent tool. This strategy not only lightens the load of financial obligations but also accelerates your trajectory towards genuine financial independence.
Remember, your financial choices should be grounded in a thoughtful consideration of your distinctive circumstances, ensuring a future that is secure and empowered.
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- Jetaish Gupta, Co-Founder & Director, Adore Group
- Amit Gupta, MD, SAG Infotech
- Subhash Goel, Director, Goel Ganga Developments
- Reserve Bank of India (RBI)