Owning a home is a dream for many, but the burden of a long-term home loan can sometimes feel overwhelming. What if we told you there’s a clever way to pay less interest and achieve financial freedom faster?
It’s simple: each year, increase your monthly home loan payment by just 5%. In this comprehensive guide, we’ll break down how this ingenious strategy can help you save a significant 39% on interest and allow you to fully own your home in just 12 years instead of the usual 20.
The Magic of Small Increases
When you secure a home loan, the bank presents you with your monthly instalment, commonly referred to as the EMI (Equated Monthly Instalment). The beauty of this technique lies in gradually increasing your EMI by 5% every year, which can dramatically accelerate your loan repayment. Here’s how it works:
Let’s assume you’ve borrowed ₹10,00,000 to purchase your dream home. With a standard EMI, you’d be paying approximately ₹7,805 every month, resulting in a staggering ₹8,70,223 spent on interest alone over 20 years. However, by initiating your repayment journey with a ₹7,805 EMI in the first year and progressively increasing it by 5% each year, something remarkable unfolds.
Crunching the Numbers
The magic commences in the second year when your EMI rises by 5%, amounting to about ₹8,195. The success of this financial strategy is nothing short of remarkable, and this incremental tendency continues every year. A loan that was initially intended to be paid off in two decades will now be fully settled in just 12 years!
But the perks don’t stop there. By adopting this strategy, you’ll significantly reduce the amount of interest paid. Instead of shelling out ₹8,70,223 in interest, you’ll only be liable for approximately ₹5,30,779. This translates to substantial savings of ₹3,39,444! It’s comparable to receiving a significant discount on your ideal home.
To implement this financial strategy effectively, it’s essential to confirm with your bank that they permit EMI increases without any hassles. Additionally, you must ensure that you can comfortably manage the higher EMI amount each year. With discipline, foresight, and sound financial planning, this uncomplicated technique can have a significant impact on your finances, resulting in substantial savings and expediting your path to becoming a homeowner.
Here are some easy steps to get you started:
Confirm with your bank: Reach out to your lending institution to ensure that they permit annual increases in your EMI. Although the majority of banks allow this practice, it is usually advisable to double-check.
Assess your budget: Before committing to this strategy, carefully review your financial situation. Ensure that you can comfortably handle the increased EMI each year without straining your finances.
Create a financial plan: Develop a comprehensive financial plan that outlines your income, expenses, and savings goals. Factor in the incremental EMI increases to ensure they align with your long-term financial objectives.
Automate the process: Whenever possible, set up an automated transfer system to increase your EMI annually. This will prevent any lapses and ensure you stay on track.
It might sound too good to be true, but it’s not! Increasing your EMI by just 5% every year can lead to substantial savings and an early mortgage payoff. So, why wait 20 years when you can own your home in 12 and save a remarkable 39% on interest? Start today and take control of your financial future! By implementing this simple yet effective strategy, you can turn your homeownership dreams into reality and achieve financial freedom sooner than you ever imagined.