Everybody would want to get rid of their home loans and acquire the legal possession as soon as possible but it is not an easy task. However if some one is in a debt free financial position where paying off the loan would not affect other aspects of life, then it does make sense to prepay the home loan.
Paying off your loan faster is another way to save money because the longer one takes to pay off his loan amount, the more interest he has to pay along the tenure and the higher is the overall cost of the loan. So doing away with the loan faster would help you to store some money that would be used to serve the EMIs (equated monthly installments).
Most of the time early repayment of home loans is taken lightly by the borrower. However it is a significant decision and should be taken only after making an allowance for your needs at a later stage of life.
The way that you make your repayment is also an important factor because it would have biggest effect on the overall term and cost of your loan. Here are a few of the most common options that enable you to pay off your loan faster:
Increase your payment: An extra repayment at any time would help to reduce both the tenure and cost of a loan. So if one get a bonus or additional income, utilize it to make higher payments or balloon payments. Most lenders will allow you to pre-pay your home loan but with certain restrictions.
Pay your first installment on settlement date: This will immediately reduce the principal and therefore all future interest repayments too. Our loans are based on the effect of compounding interest over time, so by making this repayment on day one of your loan at settlement, you can save money at the same time.