7 Best Ways to Reduce Home Loan EMI Amount in 2024

how to reduce home loan emi

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Last updated on 23rd January 2024

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Reduce Home Loan EMI Amount

Stepping into your dream home is an achievement that brings immense joy. However, the accompanying home loan EMI can sometimes feel like a financial burden. But fret not, there are innovative ways to lighten this load. In this blog, we will answer your question of how to reduce home loan emi by exploring various strategies and techniques to reduce your home loan EMI and make your homeownership journey smoother than ever before.

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1. Refinancing and Home Loan Interest Rate Reduction

One of the most effective ways for home loan interest rate reduction of an existing home loan is by refinancing your existing loan. Keep an eye on the current market trends and the interest rates offered by different lenders. If you find a lender offering a lower interest rate than your current one, consider refinancing. A lesser interest rate can significantly reduce your monthly EMI, allowing you to save a substantial amount over the loan tenure.

To get an idea of how refinancing can affect your EMI, you can use the EMI calculator reducing balance method. These calculators take into account the outstanding loan balance, the tenure, and the interest rate to give you a precise estimate of your new EMI amount after refinancing

2. Increase the EMI Amount

While it may sound counterintuitive, increasing your EMI amount can actually help you reduce the overall cost of your home loan. By paying a higher EMI, you reduce the principal amount faster, which, in turn, reduces the interest payable. This strategy can help you reduce home loan tenure, ultimately saving you money in the long run.

Before opting for this method, ensure that you have the financial capacity to commit to a higher EMI. It's important to strike a balance that allows you to comfortably meet your monthly obligations while accelerating your loan repayment.

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3. Make Partial Prepayments

Another effective way to reduce your home loan EMI is by making partial prepayments whenever possible. Whenever you receive a windfall, such as a bonus or an unexpected financial gain, consider using a portion of it to make a lump-sum payment towards your home loan principal. This reduces the outstanding loan amount, which, in turn, lowers the EMI.

Keep in mind that some lenders may charge a nominal fee for making prepayments, so it's essential to check the terms and conditions of your loan agreement before proceeding. Making periodic prepayments can significantly reduce your overall interest payout and help you close your loan sooner.

4. Opt for Longer Loan Tenure Initially

When you apply for a home loan, you can choose the loan tenure. While opting for a longer tenure initially may result in lower EMIs, it provides you with flexibility. You can always choose to reduce the tenure later when your financial situation improves.

By starting with a longer tenure, you have the freedom to switch to a shorter tenure without any change in the EMI amount. This strategy can help you adapt your loan repayment to your evolving financial circumstances, allowing you to make higher EMIs when you can afford them and lower EMIs when needed.

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5. Utilize Home Loan EMI Calculator

A home loan monthly EMI calculator is an invaluable tool that helps you plan and manage your home loan effectively. Using this tool, you can experiment with various loan tenures and interest rates to see how they impact your EMI. It provides you with a clear picture of how different parameters affect your monthly EMI amount.

Additionally, the calculator can help you determine the ideal EMI amount that suits your budget and financial goals. It's essential to use this tool before taking out a home loan and periodically during your loan tenure to assess whether any adjustments are needed to reduce your EMI.

6. Opt for a Step-Up or Flexi EMI Plan

Some lenders offer specialized home loan schemes such as step-up or flexi EMI plans. These plans are designed to cater to borrowers with increasing income potential. In a step-up plan, the EMI starts lower and gradually increases over time, aligning with your income growth. On the other hand, a Flexi EMI plan allows you to increase or decrease your EMI amount as per your financial situation.

These plans provide flexibility in managing your EMI commitments and can be an excellent way to reduce your EMI burden without straining your finances.

7. Save Money via SIP

Investing through a Systematic Investment Plan (SIP) in equity funds is a fruitful manner in which you can save a significant amount of money every month, which can further be used to foreclose the loan. Saving around 10% of your EMI amount in a SIP throughout your home loan tenure will give you a good lumpsum amount that is sufficient to clear off a portion of your debt.

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Reducing your home loan EMI amount in 2024 is achievable with the right strategies and financial planning. Whether you choose to refinance, increase your EMI, make partial prepayments, opt for a longer tenure initially, use an EMI calculator, or explore specialized EMI plans, it's crucial to align your approach with your financial goals and capacity.

Remember that every borrower's situation is unique, and what works best for one may not be suitable for another. Therefore, it's advisable to consult with a financial advisor or mortgage expert to tailor these strategies to your specific needs. With careful planning and disciplined financial management, you can easily reduce your home loan EMI and achieve your homeownership dreams.

FAQs about How to Reduce EMI of Existing Home Loan

Yes, you can reduce the EMI on a home loan by refinancing, increasing the EMI amount, or making partial prepayments.

To reduce home loan interest on EMI, consider refinancing at a lower interest rate or making prepayments to reduce the outstanding balance.

To reduce your home loan EMI and tenure, you can increase your EMI payments, refinance at a lower interest rate, or make prepayments.

There is no single formula for EMI reduction. To calculate it accurately, use an EMI calculator with your loan details.

You may inquire with your lender about the possibility of deferring EMI payments for a few months in certain circumstances.

Yes, it's possible to clear all EMIs in advance by making full prepayments on your home loan.

Cancelling or missing EMIs can have a negative impact on your credit score, so it's essential to manage your payments responsibly.

Published on 26th September 2023