Home Loan(er) to Home Home Owner!

Have you ever wondered while paying home loan EMIs, “Are you the owner of your house or a loaner?”  Do you know how much you end up paying over the years in EMIs to your bank for the loan you have taken? Isn’t there anything you can do about it? 
Home Owner


Lets understand this trivia which is simply called as “Home Loan or Mortgage!"
Do you know, how much you are paying?
Have you ever imagined; how much you will end up paying for a loan taken to buy your dream home over a period of 20 years? 


How much you are paying?

There are many EMI calculators available online. I have used the one available on www.moneycontrol.com to calculate the amount one will end up paying for a loan amount of ₹ 50,00,000/- @ 9.00% interest for a term of 20 years. And the results are

Loan Amount
ROI
Term (Years)
₹ 50,00,000
9.00%
20
Total Payment*
Interest & Charges
EMI
₹ 1,12,29,160
₹ 62,29,160
₹ 46,746
* Approximate Values
Its interesting to know that one will end up paying more nearly 2.25x of the loan amount over the period of 20 years.
Let the magic of prepayments begin early!
Just by paying 3 extra EMIs towards prepayment at the end of 1st year some sort of magic starts happening. Let’s see a simple illustration:

Prepayment
Paid After
₹ 1,50,000
1 Year
Interest Saved*
Tenure Reduced
₹ 6,25,000
17 Months
* Approximate Values 
Imagine the wonders a simple habit of making prepayments can make to your home loan! Its important to know that, the EMIs paid during the first few years are more towards the accumulated interest and not towards the principal payment. Nearly 75%-80% of the EMI goes towards purely towards the interest during the first 3-5 years of your loan. And hence any prepayments made during this period reduces your total outstanding loan and also reduces total interest to be paid over the balance term drastically. Here is small illustration of benefits of making prepayments earlier in your loan tenure:
Prepayment
Amount
Paid
After
Interest
Saved*
Tenure
Reduced
₹ 1,50,000
1 Year
₹ 6,25,000
17 months
₹ 1,50,000
3 Year
₹ 5,00,000
14 months
₹ 1,50,000
5 Year
₹ 4,00,000
12 months
₹ 1,50,000
7 Year
₹ 4,00,000
10 months
* Approximate Values
You can increase the prepayment amount with every following year and become homeowner from home loan(er) much before tenure of your home loan!

So bemoneywise and start home loan prepayments today!!!

Stay tuned for “How to plan smartly for your home loan prepayments!!!”


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