September 17, 2013 10:01 am
I wish to know the pros & cons of reducing the tenure or EMI while making a part-payment in a home loan. As you know most private banks have increased the ROI on home loans.
Thanks for your inputs.
The sole motto of every person who has a loan in his pocket – is to quickly finish off the loan. So your suggestion truly holds true.
Actually at times, many people as part of their tax planning want to continue their home loan 🙂
Currently my outstanding is 26lac and my present emi is 30k. Suppose if i make a part payment of 8 lac, and i want to decrease the emi around 18k, is it a good option of remaining salary amount to make part payment each month
I suggest make the part payment, but do not reduce your EMI. This way your tenure will come down drastically !
When you make the prepayment, by default in almost all the cases , the EMI remains the same and the tenure gets decreased. Only if at some point bank feels that due to increase in interest rates, the EMI number has risen a lot , they will then suggest you to pay some part of loan to bring back the EMI to same level as past or decrease the EMI number and keep the tenure at the level.
But you as an investor should opt for decreasing the tenure and not EMI . That helps to finish off the loan faster , considering that is your true desire !
What about those who want to take second loan by reducing the EMI on each pre-payment. It will help to take good amount of loan while taking new loan. Suppose as per the current income you have power to hold 40k as emi. you have reduced current loan the emi to 10k or 15k than you will be eligible for new loan with considerable amount, if you looking for new loan.
Manish let me your view on this. Currently I had taken 16k as loan reduced it to 15k with prepayment. is it be a good option if I will take up a new loan after next 3 year estimating reduced emi that time will be around 11k.
Its totally fine to pre payment the loan after some years in the way you are mentioning . The article I wrote was mainly for those who just finish it off in few months of taking it without creating any history !
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