Due to the wave of global inflation, interest rates have remained relatively high, along with a significant increase in livelihood in recent years. This has led Indian homeowners to reconsider their financial obligations in the long term.
A powerful way to take control of your financial health and to significantly reduce your overall debt burden is through the correct planning and prepayment of your housing loan. Whether it is done completely or in part, prepaying your housing loan can unlock multiple benefits. These include improved creditworthiness, savings by lower interest payments and long-term profits, such as lower processing cost-striking some of the benefits you can enjoy by managing your housing loan proactively.
This description is devoted to discussing the most important points to keep in mind when considering the reimbursement of your housing loan.
Interest rates for housing loans in 2025: still about 9% float
From April 2025, the interest rates of housing loan at banks such as SBI, Kotak Bank, HDFC Bank, Icici Bank and others between 8.25 percent and 10.25 percent, depending on factors such as the credit profile of the borrower, credit score, loan amount and return options.
It is generally noted that the borrowers can pay the loan amount in interest for a typical 20-year repayment requirement with 1.5 to 2 times. For example on one £75 Lakh loan at an interest rate of 9 percent, the total interest paid can be higher than £85 Lakhs if the loan is not repaid early.
Views of expert
Rishi Anand, MD & CEO of Aadhar Housing Finance Ltd, shared his opinion about the prepayment of a home credit in an exclusive conversation with Mint. He stated: “Prepaying a housing loan can be a financially sensible decision, especially in the early years of the loan of the loan when the interest component is highest. In the current scenario it can be indicated for a loan of the floating rate. With interest rates on their peak and expectations of the tariff reductions in the future, in the long -term reductions in the future as lenders, in the long -term reductions in the future, in the past.”
He added: “An additional advantage is the absence of advance payment fines on loans for floating rate, making partial payments and full pre -payments easier and more cost -effective.”
This description is aimed at discussing five important points to keep in mind when considering the option to pay your housing loan in advance:
1. Focus on lowering your general interest expenditure
You must concentrate on reducing your overall interest rates. The sooner you pay, the greater your savings. EMIs for housing loan are extreme interest rate, especially in the first years. That is why prepaying during this phase significantly reduces the principal, so that the general interest burden for your loan is reduced.
For example, if you pay in advance £5 Lakhs in the fifth year of you £75 Lakh Woning loan, it may help you to save £10–17 Lakhs in interest on the remaining term of office. Warren Buffett, chairman of Berkshire Hathaway, perfectly summarizes the concept of saving and financial discipline together with this quote: “Do not store what is left after expenses, but spend what is left after saving.
2. Real peace of mind by obtaining financial freedom to obtain
Prepaying your housing loan reduces your monthly EMIs and shortens the total loan of the loan. This in turn helps to clear your cash flow. Such a flexibility is particularly favorable during uncertain times, so that you can divert funds to higher education, pension planning, health management or even investments that offer a higher return in the future. Moreover, owning your house also brings a feeling of mental peace, calmness and clarity – especially for those who retire.
3. Own your credit score and future loan
Preparation clearly reflects strong financial health, which positively influences both your credit report and a credit profile by presenting financial clarity and discipline. A solid credit history and low outstanding debt can increase your credit score and improve your suitability for future credit – whether it is a personal loan, car loan, home credit or business financing. Lenders prefer borrowers with lower debt-income ratios. It is also important to maintain a low credit use ratio, because this shows that you are not overly dependent on debts or frequent lending.
4. Tap your equity
Remember that once you have completed the entire reimbursement process of your housing loan, your property becomes a complete possession. This means that you can further use the equity of your house in the future through loans for equity or mortgage -based loans. These options generally offer relatively lower interest rates, higher loan amounts and more flexible repayment conditions – completely dependent on the market value of your real estate.
5. No advance payment on loans at floating speed
There are continuous discussions, stimulated by the RBI, with regard to prepayments-in particular fines on loans with floating speeds. Most banks and NBFCs currently do not charge a payment fine for home loans for floating speeds. However, this remains an evolving problem. It is advisable to contact your respective provider of housing loans for detailed information about the applicable interest rates, advance payment conditions and possible fines.
Conclusion
To conclude, the preparation of housing loan is not just about saving on interest rates. It is about regaining financial control and strengthening your financial future. Before you opt for advance payment, it is essential to carefully evaluate your existing financial obligations and challenges. Factors such as emergency fund management, potential investment returns and your overall financial capacity must all be taken into account.
It is always wise to repay your housing loan if the interest rate on the loan exceeds the return of investments with a low risk. By taking these simple but practical steps, borrowers can improve their financial well -being, reduce stress and create space in the future for opportunities for building wealth.
Safeguard: This article is only for informative purposes and may not be considered as financial advice. Consult a qualified financial adviser before making loans related decisions.
