Taking a home loan is quite easy now, but after taking the home loan, calculating the EMI's, every one realize that this is never ending loan.
I got so many questions, how to quickly close the home loan?
Let's take an example,
Mr A take a home loan of 30L with 8% of interest rate for 30 years.
Total Interest Payable - 4,924,655
Principal + Prepayment - 3,000,000
Total Payment - 7,924,656
Monthly EMI is 22K
This is the amount you need to pay for 30 years.
Now, If you plan to pay at least 1,50,000 per year(Since, I take this is the amount you are eligible for Tax under 80C)
Now,
Total Interest Payable - 1,405,279
Principal + Prepayment - 3,000,000
Total Payment - 74,405,280
Monthly EMI is 22K
The Home Loan will be cleared in 10 Years 6 Months.
Or the other way is,
If you can pay the lumpsum amount by taking a loan/chits, suppose you have paid lumpsum amount of 8 lakhs,
Total Interest Payable - 1,451,717
Principal + Prepayment - 3,000,000
Total Payment - 4,451,714
Monthly EMI is 22K
The Home Loan will be cleared in 13 Years 10 Months.
But you are losing the tax saving of 1.5K per year, and also you need to pay the extra interest if you take the loan.
It is advisable if the lumpsum amount doesn't attarct any interest.
Now, lets see what are the ways, you can collect 1,50,000 per year and pay your principal amount.
Accumulate Money by Monthly:
Recurring Deposits:
You can set aside an amount nearly 12,500 per month and make an FD for one year.
You can also get interest after maturity, which can be payable to the home loan.
Liquid Funds:
You can start SIP of 1-3 years liquid funds by investing 12.5K per month. But there are tax implications on withdrawal.
Tip: Don't hold your investments in liquid funds for more than 3 years, as it attracts 20% tax.
Accumulate Money by Lumpsum:
Chits:
Chits are the best way to get the lumpsum amount, and it can be paid to the home loan as a lumpsum amount.
Personal Loans:
If you opting for a personal loan, the best way is, take a personal loan of 1.5L for an year and the net payable EMI for personal loan is around 13K.
Note that there are service charges for the personal loan.
The only difference between the Paying by FD Vs Loan is, you are saving more interest while paying by loan since you pay at starting, but with FD, you pay after an year(after maturity).
Other ways:
Top-up home loans:
If you have two home loans one with lower amount and another with higher amount,
Eg.,
Home Loan 1 - 10L
Home Loan 2 - 30L
you can top-up the home loan with lower amount and pay to the higher amount, this will save interest paying on the higher amounts.
This will be helpful only when there is huge difference in the loan amounts.
Most recommended by Investors:
If you are able to take the risk, you can invest in mutual funds with the help fund managers to set a goal of clearing the home loan for 10/20 years.
PPF accounts:
If you have already invested huge corpus in the PPF accounts, you can avail 25% loan on the PPF amount.
Gold loans:
If you can avail a gold loan and the amount can be paid to the home loan principal and at the end of the financial year, you can pay only interest on the gold loan and renewal it.
Now it is your turn,
which idea will suit you for clearing the home loan, please post in comments.
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