Your Home Loan EMI Queries Answered

'Even after paying EMIs for 6 years my principal has hardly reduced by Rs 2 lakh. What is the reason?'

Do you have queries related to any aspect of home loans?

Gaurav Mohta, chief marketing officer, Home First Finance Company will answer your home loan queries.

Please mail your queries to getahead@rediff.co.in with the subject line 'Home Loan' and Gaurav will answer your home loan queries.

Cliffton Pereira: I have taken a SBI Maxgain home loan of 40 lakh with EMI of around 50,000 per month for 17 years. Even after 6 years of paying EMI, my principal has hardly reduced by Rs 2,00,000 after paying EMI of around 36 lakh for last 6 years. What is the reason that my EMI is not reducing the principal amount of my Home Loan? Do you have any excel sheet to evaluate by when my loan will be paid fully?

Gaurav Mohta: The EMI you pay every month is made up of two components: payment towards principal and payment towards interest.

In the beginning of your loan repayment, the majority of your EMI goes towards paying off the interest amount as you observed. However, over time as you pay off more principal, gradually more and more of your EMI payment starts going towards principal repayment and less for interest.

You can ask your lender for an Amortisation Table to properly track your payments and the break up therein.

If you want to make a bigger impact on your principal balance, you should start making regular prepayments.

Prepayment is an amount paid over and above the EMI amount that is deducted directly from the principal due. By reducing the principal amount, regular prepayment ensures that you pay back your principal due before the loan agreement thereby closing your loan early and saving thousands of rupees in interest outflows.

Viswanath Manda: I have a home loan with SBI which started in 2019. The loan amount is 60 lakh and tenure is for 25 months. I am regular on my EMIs and I have approximately 50 lakh liquid in my bank account. Can you please suggest if it is beneficial to clear some of my loan amount from my liquid or do you suggest any better options?

Gaurav Mohta: While it is always a good idea to pay off the maximum loan amount early to save interest on your home loan, there are some things you should definitely keep in mind.

You should always have some liquid amount available handy for regular day expenses or emergencies. Once you deduct this amount, the money available can then be used to prepay your home loan. This will help you save money on interest payments.

You can choose whether to make a bulk prepayment in one go or go for smaller prepayments. From a tax perspective, you can claim exemption on monthly EMI payments which you will not be able to once you pay back your home loan. So it might be preferable to make smaller prepayments instead.

Himanshee Pandey: I am looking for a home loan which gives a full loan for buying a house. What advice do you have for me?

Gaurav Mohta: Most lenders can only pay you a maximum of 80 per cent of the property value. The remaining 20 per cent must come from your side as down payment since it gives the lender the belief that you too have a skin in the game for the purchase.

My advice to you would be to actually pay as much down payment as you can from your side to get a better deal on rate of home loan interest and thereby lower interest payments.

Rahul Chakraborty: From where can I get a loan for home and how can I repay the loan quickly?

Gaurav Mohta: For anyone looking to buy a new home, there are a number of options available in the market. However, no matter where you get a home loan from, the tenure of repayment is likely to be roughly around 15-25 years.

Repaying your home loan quickly is a very smart move as you can stand to make huge amounts of savings on interest outflow. By making small regular prepayments over and above your EMI every month, you could stand to save lakh of money in interest payments and repay your home loan months in advance.

The facility to make prepayments without any extra charge should be a key criterion in selection for a lender.

Prit Ranjan Jha: I am a Farmer in my own business. I need a loan for home repair and property management. How can I go about it?

Gaurav Mohta: Firstly, being a farmer, you should look for lenders who operate in the rural segment and consider agricultural income. Next you need to consider whether the amount you require is large or small. For a relatively larger sum, you should prefer a secured loan mortgaged against your loan for better terms of agreement. For a smaller sum you could look into taking out a personal loan for the requirement.