Struggling Individual with an Income of INR 2.2 Lakh and INR 65,000 Savings Faces Challenges in Repaying INR 1.2 Crore Mortgage; Turns to Reddit for Assistance
A Reddit user, with a monthly take-home of approximately Rs 2.2 lakhs, has posted a query seeking advice on how to pay back a home loan faster. The user bought a house for Rs 1.6 crore and took a loan of Rs 1.2 crore, with Rs 20 lakhs coming from relatives.
The user's current expenses include household expenses (Rs 45,000), EMI (Rs 75,000), dining out (Rs 10,000), supporting parents (Rs 25,000), and savings (Rs 65,000). One user noted that the savings of Rs 65,000 is good, while another suggested saving an additional Rs 15,000 for a rainy day.
To reduce the EMI and pay off the loan faster, the user can adopt a combination of strategies. One approach is making prepayments on the principal when extra funds are available, such as from bonuses or additional income. This reduces the outstanding loan amount and lowers future interest, potentially leading to a reduced EMI or shorter tenure.
Another key approach is refinancing or balance transferring the home loan to a lender offering lower interest rates. Checking for lower MCLR or competitive home loan rates (currently around 7.95%-9.20%) can help reduce the interest burden, thus lowering EMI or enabling faster repayment.
Optimizing EMI and loan tenure strategically can also help. Keeping EMIs the same but shortening tenure saves significant interest and gets you debt-free earlier; lowering EMIs extends tenure saving short-term monthly cash flow but increasing total interest. For a steady income like Rs 2.2 lakh per month, shortening tenure while maintaining or slightly increasing EMI payments is advisable to pay off the loan faster.
Negotiating with the current lender for a better interest rate or loan terms is also important before opting for balance transfer to avoid high switch fees. Avoid unnecessarily extending the loan tenure just to reduce EMI, as it increases total interest outgo and delays loan closure. Instead, use prepayments and renegotiation as primary tools to manage EMIs without prolonged tenure.
One user commented that paying off one extra EMI per year could help with debt repayment. Another user suggested reducing or completely cutting down on restaurant and eating out expenses temporarily until debts are paid off. One user, despite having a lesser salary, expressed confidence in repaying a loan of 1.7 crores.
In summary, with a healthy monthly income, the best approach is to make periodic prepayments from any additional income and aim to keep EMIs stable or even increase slightly to shorten tenure, while actively seeking to reduce interest rates via lender negotiation or balance transfer. This balanced strategy will reduce EMI pressure and accelerate home loan payoff. The post on Reddit has received mixed reactions, with some advising to cut down on unnecessary expenses and others stating that Rs 65,000 savings is a reasonable amount.
- To accelerate the payment of the housing-market loan and improve personal-finance, the user may consider increasing prepayments against the principal using extra income or bonuses, thus reducing future interest costs and potentially lessening EMI or reducing the tenure.
- In addition to prepayments, the user can explore refinancing or balance transferring the home loan to a lender offering lower interest rates, as this could significantly decrease the interest burden and facilitate faster loan repayment.
- Managing debt-management wisely, the user might consider negotiating with the existing lender for better interest rates or terms before resorting to a balance transfer to avoid high switch fees and unnecessary prolongation of the loan tenure.
