Benefits of Paying Higher Home Loan EMIs | Kotak Mahindra Bank - Home Loan Stories

Home loans are high-value debts that can span across decades. Depending on your requirement, your home loan can amount from a few lakhs to even a few crores of rupees and significantly affect your finances. Therefore, it is best to pay it off at the earliest. Experts opine that one of the easiest ways to repay the loan faster is by paying off high home loan EMIs.

Here are some benefits of paying a higher home loan EMIs

  • Pay off the loan faster

Paying a higher EMI helps you in quicker loan repayment. With higher EMIs, you can pay off the outstanding loan even before the end of the tenure. This would help you be debt-free faster and reduce your loan burden. Paying off your loan earlier not only relieves you of your stress but also helps you become financially stable in the long run. You might have to make some compromises on luxuries or travel plans, but if paying even a slightly higher amount can help you financially in the long run, it is worth it.

  • Save on interest outgo

Your EMI consists of two elements: principal and interest. The longer the tenure, the higher is interest you will be charged. If you have opt for a lower EMI, the tenure would be longer, which would also mean an increase in the interest rate and total cost of borrowing. On the other hand, paying a higher EMI will help you save on the interest outgo. You can check the difference in your total repayment amount with the help of a home loan EMI calculator by using tenure as a variable. A higher EMI would help you repay the loan faster and save on the interest component. 

  • Better credit score

Experts opine that paying a higher EMI and repaying the home loan before the end of the tenure can help you enhance your credit score. When you pay a higher EMI, it has a positive impact on your repayment capacity and creditworthiness. Lenders also consider you to be a trustworthy borrower, improving the chances of loan approval in future.

  • Tax benefits

You can claim tax benefits on a home loan under sections 80C and 24(b) of the Income Tax Act, 1961, on the repayment of principal and interest. A tax benefit of Rs 2 lakh is available on interest repayment. Whereas, a tax benefit of Rs 1.5 lakh is available on the principal component. However, often borrowers are unable to utilise the maximum tax benefits by paying a low EMI. A higher EMI can help you utilise these tax benefits to the maximum capacity.

It might be challenging to pay a higher EMI as soon as you avail a loan. However, with time and improved affordability, you can create room for additional payout towards the EMIs. Though paying a higher EMI is beneficial for your home loan, you must check your financial viability before increasing your EMI. Your EMI should not burden your budget or restrict your daily expenses. It would be best to assess your income and expenses and then determine the home loan EMI.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.