How to Reduce Home Loan EMIs and Save on Interest: Expert Insights
Rs 40 lakh home loan: Cut EMI, save interest now; experts explain how
Business Standard
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The Reserve Bank of India has kept the repo rate steady at 5.25%, allowing borrowers to reassess home loans. A ₹40 lakh home loan at 9% interest for 20 years could see significant savings through refinancing and prepayments, potentially reducing EMIs and total interest paid.
- 01Current repo rate is 5.25%, unchanged by the RBI.
- 02Refinancing a ₹40 lakh loan from 9% to 7.25% can save nearly ₹8 lakh in interest.
- 03Making a ₹4 lakh prepayment can reduce loan tenure by nearly 4 years and save over ₹12 lakh in interest.
- 04Borrowers should consider switching from MCLR to repo-linked loans for better rates.
- 05Maintaining an emergency buffer of six months' EMIs is crucial for financial stability.
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The Reserve Bank of India (RBI) has maintained the repo rate at 5.25%, providing an opportunity for borrowers to reassess their home loans. For a ₹40 lakh loan at 9% interest over 20 years, refinancing to 7.25% can reduce monthly EMIs from approximately ₹35,989 to ₹32,060, yielding savings of nearly ₹8 lakh in total interest. Experts suggest that making a one-time prepayment of ₹4 lakh can cut the loan tenure by almost 4 years and save over ₹12 lakh in interest costs. Additionally, borrowers still linked to the marginal cost of funds-based lending rate (MCLR) should consider switching to repo-linked loans for better benefits. With stable rates, now is an ideal time to act, ensuring that home loans do not become a burden as borrowers approach retirement.
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Refinancing and making prepayments can significantly reduce the financial burden of home loans, allowing borrowers to save on interest and shorten their repayment period.
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