5 Easy Steps To Prepay A Home Loan

Welcome to FundooMoney, your 24X7 buddy on all your money matters! The longer you take to repay your home loan, more interest you pay. That’s why it is always a smart idea to prepay it before the end of the home loan tenure. Wondering how to go about home loan prepayment? We will give you a five step plan very shortly.

Avoid prepayment penalty
You need to avoid any prepayment penalty on your home loan. Typically, there is no prepayment penalty on floating rate home loan. However, a fixed rate home loan may have a penalty. In a hybrid loan, typically with a fixed interest rate period upfront, it is better that you see off that period and prepay when the floating rate period starts.

Choose suitable prepayment method
You have to save for an entire year and make an annual partial prepayment. Else you can request the lender to bring down the tenure of the loan by increasing your EMI to a level which you can afford for faster loan repayment.

Invest in better return alternatives 
Home loan comes with tax advantages under Section 80C for home loan principal repayment and Section 24 for home loan interest payment. Some people prefer investing their surplus to generate higher returns after tax with which they hope to later prerepay their home loan. However, this route makes sense for savvy individuals who rarely falter with their investments.

Go for periodic partial prepayments
For many, it would be difficult to pay off the loan at one go. They might be better served by making successive partial prepayments to reduce the outstanding home loan amount and try to accelerate the home loan repayment.

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