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How to Repay a Home Loan Faster

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Created on
February 17, 2023


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Paying off your home loan earlier than its maturity date can significantly reduce your financial burden in the long run. Some lenders offer a flexi EMI option which allows you to pay higher amounts if you can. There are a few ways you can get rid of your debt sooner than you think, and this article covers all of it.

Ways to Repay Your Home Loan Faster

Consider making a larger down payment

Most banks and non-banking financial companies (NBFCs) offer home loans that cover up to 90% of the purchase cost. A larger loan amount translates to a higher total interest payable. However, by paying a larger initial down payment, say 20%, you can lower your loan amount and repay it sooner. As an added benefit, this makes your Loan-to-Value (LTV) ratio more attractive and generally improves your home loan eligibility.

Choose your lender and loan tenure wisely

India is largely a credit-starved economy. Meaning that there are many out there who have the means but not the required credit history to take a loan. There’s an abundance of lenders in the market and each with their own terms, so make sure to carefully evaluate the repayment terms, interest rates, and other charges. 

All of these come together to determine your EMI. Lower interest rates and EMIs can help you avoid additional charges (like late fees) and make an early home loan repayment possible.

The tenure of the loan needs to be properly thought through. Shorter tenures mean higher EMIs. A long tenure usually translates to lower EMIs but higher interest payments. While longer tenures give you more room to pay out the EMIs, the overall amount of interest you’re paying is much more.

So, select your tenure based on your financial capability. High EMIs (if you can afford them) will allow you to repay faster and save on interest.

By making extra payments towards your home loan each month, you can achieve home loan early repayment and repay your home loan easily.

Part-pay the home loan

Whenever you receive your annual bonus or any other big gains, you could consider using it to make a part-payment and reduce your principal loan amount. This, in turn, reduces your EMI and also the net interest that you will need to pay. 

Section 24 of the Income Tax Act of India offers tax deductions of up to ₹2 Lakhs for home loan interest payments each financial year. Do factor this in while doing your calculations. If the cost of repaying the loan outweighs the benefit (for example, if you just have less than 5 years left in the loan tenure), you may be better off with the existing repayment schedule.

Benefits of early repayment of your home loan

An early home loan repayment can give you multiple benefits.

  • Lower total cost of ownership due to lesser interest outflow.
  • Reduced financial and emotional burden.
  • The money freed up can be invested in any investment tool (like stocks or mutual funds) and earn returns for your future.
  • Timely repayment improves your credit score. This, in turn, helps you avail of other loan products easily, at attractive interest rates and flexible repayment terms.

Frequently asked questions

Do extra payments automatically go toward the principal?

This varies by lender. Many banks and NBFCs allow part-payment of loans by first reducing the principal. The reduction in the principal results in lowered EMI amounts because your interest on the unpaid principal is also lower at this point. Others, though, first adjust the additional payment from the interest to be paid. Once it becomes nil, the amount starts getting reduced from the principal.

Consult your lender to understand the specific terms and conditions. Ask if they allow for ‘Principal-Only Payments’, which means the additional amount repaid will be deducted from the principal. Also, ask if they levy any part or prepayment charges, as you will need to factor these in to do a thorough a little bit of cost-benefit analysis. This is because when you pay off the loan sooner, the lender is going to lose the money they could otherwise have made from your agreed-upon repayment schedule. 

How can I pay off a 30-year loan in 15 years?

Yes, you can. There are a variety of ways you can go about paying off a 30-year home loan in 15 years. These include:

  • Increasing your EMIs
  • Making addition part-payments
  • Checking for refinancing options with your lender (this could mean taking a lower interest loan that you can use to pay a higher interest rate loan)
  • Taking a personal loan at a lower rate to pay a bigger chunk of the home loan
  • Renegotiating your loan terms and interest rate

Before employing any step, consult your lender first to understand if there are any additional charges levied by them for part-payments.

How to pay off home loan in 3 years?

To pay off a home loan in just 3 years, you would need to make significantly higher monthly payments than the minimum required amount. This would require careful financial planning and budgeting to ensure that you can afford the increased payments. You could consider increasing your income through side hustles or additional jobs, reducing your expenses, or tapping into your savings or investments to make lump-sum payments towards the loan.

How can I clear my bank home loan faster?

To clear your bank home loan faster, you can consider making extra payments towards the loan whenever possible. This could include making larger monthly payments, making more frequent payments (e.g. biweekly instead of monthly), or making lump-sum payments towards the loan whenever you have extra funds available. You could also consider refinancing your loan to get a lower interest rate or shorter repayment term, which could help you save on interest and pay off the loan faster.

What happens if I pay extra on my home loan?

If you pay extra on your home loan, the extra amount will be applied towards the principal balance of the loan. This means that you will reduce the total amount of interest you will pay over the life of the loan, and you will pay off the loan faster. Additionally, paying extra towards the loan can help you build equity in your home more quickly.

Is it advisable to close home loan early?

Whether it is advisable to close a home loan early depends on your individual financial situation and goals. If you have other high-interest debts or investments that could yield higher returns than the interest rate on your home loan, it may be more advantageous to focus on paying off those debts or investing your funds elsewhere. On the other hand, if you have excess funds that are not earning a high rate of return, paying off your home loan early could be a smart financial move that could save you thousands of rupees in interest over the life of the loan.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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