Home Loan Calculations: How you can save nearly Rs 22 lakh and 4 years on Rs 70 lakh loan for 25-year tenure
In most cases, individuals look for a minimum EMI option considering their comfort and pocket. But sometimes pushing your limits a bit can benefit you in the long run. Choosing a shorter loan tenure can impact your finances. While it may result in slightly higher monthly payments, it will ultimately save you money and time.
A home loan is a big responsibility that lasts for many years. If you take a Rs 70 lakh loan for 25 years, you can save up to Rs 22 lakh in interest and finish your loan 4 years earlier with some simple steps. By paying a little extra every month, you can reduce your overall loan burden. These small efforts can help you save a lot of money and become debt-free faster. Let’s understand how smart planning can save you time and money.
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(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
Long vs short tenure: Understanding the time period
When you take a home loan, many people choose to pay it back over a long period (like 25 years) to keep their monthly payments (EMIs) low. This makes it easier to manage your budget. But, you can save a lot of money and pay off your loan much faster with a small change. By slightly increasing your monthly payments, you can reduce the overall interest you pay and become debt-free sooner.
Example of long vs short tenure
With a 25-year tenure, 70 lakh loan, 9.5 per cent interest rate, the EMI will be approximately Rs 61,159, and the total interest paid over the period can be approximately Rs 1,13,47,630.
Now, if you opt for a slightly increased EMI, you can save up to Rs 22 lakh and finish your tenure 4 years earlier.
Why should one opt for a shorter tenure?
Enables individuals to channel funds into other investments earlier.
Paying off the loan early reduces your psychological pressure.
Shorter tenures lead to reduced overall interest payments.
What will be your EMI on Rs 70 lakh loan for 25 years?
On a Rs 70 lakh loan for 25 years at a 9.50 interest rate, the estimated monthly EMI amount will be Rs 61,159.
What will be your total interest on Rs 70 lakh loan in 25 years?
The estimated total interest in 25 years will be Rs 1,13,47,630 on Rs 70 lakh loan.
What will be your total repayment amount on Rs 70 lakh loan in 25 years?
The total estimated repayment amount will be Rs 1,83,47,630.
How much extra EMI you need to repay?
The additional amount will be Rs 3,304. So, your overall EMI will be Rs 64,466.
What will be your total interest on Rs 70 lakh loan in 21 years?
The total estimated interest in 21 years will be Rs 90,51,926 on Rs 70 lakh loan.
What will be your total repayment amount on Rs 70 lakh loan in 21 years?
The total estimated repayment amount will be Rs 1,60,51,926.
How much money you will save?
The estimated amount saved because of an increase in EMI will be approximately Rs 22,95,704.
How much time you will save?
The time saved will be 4 years.