Raj and Anjali, a newly married couple, recently purchased a 2-room flat in Mumbai worth ₹1.75 crore. To fund their dream home, they took a ₹1.5 crore home loan with a 30-year tenure.
Raj earns around ₹25 lakh per annum (LPA), and Anjali draws ₹15 LPA from her IT role. Raj, having invested in mutual funds since 2016, has grown comfortable with an aggressive investment strategy. Now, with their joint financial strength, the couple is exploring whether they can repay the loan in just 10 years, and if doing so could bring significant interest savings.
With an interest rate of 8.75%, the standard EMI on a ₹1.5 crore loan stands at ₹1,18,541 per month.
This repayment schedule means paying nearly ₹2.77 crore in interest alone over the loan period.
Switching to a 10-year tenure significantly increases the EMI to ₹1,88,394 per month. But the trade-off is steep savings in total interest paid.
This approach cuts interest outflow by almost ₹2 crore, compared to the standard 30-year plan.
Read More: Home Loan EMI vs SIP: Which Is a Better Path to Buying Your Dream Home?
With a combined annual income of ₹40 lakh, Raj and Anjali may find the higher EMI manageable through effective budgeting. As both are in the early stages of their careers, future increments and promotions can further ease the financial load.
Moreover, since they may now be under the new tax regime, the popular deductions like ₹2 lakh under Section 24(b) and ₹1.5 lakh under Section 80C are likely not applicable, making faster repayment a cleaner, more efficient financial choice.
Any annual bonuses or one-time lump sum gains can be directed toward prepaying the principal. Most lenders allow prepayments without penalties, and these reduce the loan’s interest burden immediately.
Even a few prepayments during the loan tenure can significantly compress the repayment duration and lighten the EMI load in the later years.
Equity markets historically yield 11%–13% annually over the long term, while home loans come at 8%–9%. Theoretically, investing surplus funds could yield better returns, but not without risk.
Debt-free living brings not just financial clarity but emotional peace, which many value over chasing higher but uncertain gains. Sometimes, financial decisions go beyond spreadsheets and are more about what helps you sleep better at night.
By restructuring their repayment plan from 30 to 10 years, Raj and Anjali could save close to ₹2 crore in interest. With stable dual incomes, a few strategic prepayments, and clear financial intent, such outcomes are within reach for many working couples today.
In an era of shifting tax benefits and uncertain markets, managing liabilities well is often the cornerstone of long-term wealth creation.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Published on: May 15, 2025, 2:20 PM IST
Team Angel One
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