Took A ₹60 Lakh Home Loan? Here’s How You Can Save ₹17 Lakh Interest Payment!

Taking a home loan is one of the biggest financial commitments you will make. For example, if you borrow ₹60 lakh at an interest rate of 7.50% for 25 years, your monthly EMI will be ₹44,339. 

By the time you finish paying off the loan, you would have paid a total of ₹1,33,01,841 (with ₹73,01,841 of interest). This is the usual way most people repay their home loans, but there is an easy way to save both time and money.

Increase Your EMI Slightly to Cut Down Loan Tenure

The key strategy is simple: increase your EMI by a small, manageable percentage. For instance, increasing your EMI by just 8.63% to ₹48,336 can reduce your loan tenure from 25 years to 20 years. That’s a full 5 years shaved off your repayment period!

How Much Can You Save?

Reducing your tenure has a huge impact on the total interest you pay. With the shorter 20-year tenure, your total interest payable drops to about ₹56,00,542. This means you save a whopping ₹17,01,299 in interest alone!

Your total amount paid over the loan period will also decrease significantly, from ₹1,33,01,841 down to ₹1,16,00,542.

Bank Processing Fees to Consider

When taking a home loan, it’s also important to consider the processing fee charged by banks, as it adds to your initial cost. For example:

• State Bank of India (SBI) charges a processing fee of 0.35% of the loan amount plus GST, with a minimum fee of ₹2,000 + GST and a maximum of ₹10,000 + GST. Their home loan interest rates start from 7.50% per annum.
• HDFC Home Loans charges up to 0.50% of the loan amount as a processing fee, subject to a minimum of ₹3,300. Their interest rates start from 7.90% per annum.

Understanding these fees helps you plan better and avoid surprises during loan approval.

Why Does This Work?

When you increase your EMI, you pay off more of the principal amount each month. Since interest is calculated on the remaining principal, reducing it faster lowers the total interest accrued over time. This shortens the loan tenure and reduces the financial burden.

Read more: How a 25-Year-Old Can Retire Rich with Just ₹5,000 SIP Monthly?

Conclusion

A small increase in your monthly EMI can make a huge difference in both how quickly you repay your home loan and how much interest you pay overall. By choosing to pay a little extra each month, you can be free of your loan five years earlier and save lakhs in interest payments. 

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.

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