Home Loan Savings: How This Small Step Can Help You Save Over ₹30 Lakh

Many borrowers focus only on monthly EMI amounts when selecting a home loan, often overlooking how the tenure affects total repayment. Through a relatable case study, we explore how a small shift in loan tenure can lead to massive savings.

Here is a case study that shows how a simple choice between 2 home loan tenures can result in over ₹30 lakh difference in total outgo.

The Scenario: Same Loan Amount, Different Tenures

Let us consider a common situation faced by many first-time homeowners. A borrower is planning to take a home loan of ₹1 crore at an interest rate of 8.5%. The financial institution offers 2 tenure options, one for 15 years and another for 20 years.

While the EMI for the longer tenure appears more manageable on a monthly basis, the borrower wants to understand how the decision will impact the overall cost of the loan.

Scenario 1: 15-Year Loan Tenure

In the first option, the borrower selects a 15-year tenure. Here are the repayment details:

• Loan amount: ₹1 crore
• Interest rate: 8.5%
• EMI: ₹98,474 per month
• Total interest paid: ₹77,25,312
• Total amount payable: ₹1,77,25,312

Scenario 2: 20-Year Loan Tenure

Now let us look at the 20-year tenure. The monthly EMI goes down, but here is how the full repayment structure changes, and this has been done using the home loan EMI calculator: 

• Loan amount: ₹1 crore
• Interest rate: 8.5%
• EMI: ₹86,782 per month
• Total interest paid: ₹1,08,27,758
• Total amount payable: ₹2,08,27,758

The Difference in Interest Paid

At first glance, the 20-year loan might look more comfortable due to the lower EMI. But when we compare the total interest paid in both scenarios, the picture changes dramatically.

Extra interest paid in 20-year loan: ₹1,08,27,758 − ₹77,25,312 = ₹31,02,446

That is over ₹31 lakh more in interest just for extending the tenure by 5 years. Even if we look purely at the total amount payable, the difference is more than ₹20 lakh.

Read More: Check Out Top Mutual Funds with Highest AUM from Non-Associate Distributors! 

Conclusion 

This case study highlights the importance of assessing the long-term impact of financial decisions. While the shorter tenure requires a slightly higher monthly outflow, the overall savings far outweigh the immediate comfort of a lower EMI.

Borrowers are encouraged to consider not just what they can afford each month, but how much they are willing to pay over time for that convenience.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or 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.

Investments in securities are subject to market risks. Read all related documents carefully before investing.