Best Ways to Save Taxes on Your Home Loan Repayment

8 Best Ways to Save Taxes on Your Home Loan Repayment

Everybody wants to own a home where they can live peacefully. Purchasing a home is not an easy task, as it requires a lot of investment, and people prefer low-interest home loans. The excitement of buying your own home fades away when you think about the colossal amount of tax that you will have to pay.

The moment we get ready to start repaying then we suddenly realize that we are paying too much interest, and it also makes our monthly repayment a financial burden. Paying home loans through Equated Monthly Installments (EMIs) for a certain period of time can be taxing. So, it is wise to plan everything strategically, which can save you a lot of money. Always make sure that the situation goes in your favor.

Being a smart borrower means finding ways to save money and cut down on unnecessary expenses. There are also certain financial risks involved if you are not fully aware of the home loan and repayment process. After the loan repayment, the property is transferred to the borrower.

So, ensure that you repay the loan on time without making any delay, as delay causes problems for your credit history. Through this blog, we have tried to empower the public by equipping them with knowledge and information on how to save tax on home loan repayment.

8 Ways to Save Tax on Home Loan Repayment

As it is always important to make your financial plans properly, you should not make your plans on an ad-hoc basis to achieve a temporary goal. While buying a home,e you have decided to take a home loan, always plan how to make your repayment process hassle-free. You must understand properly the effective ways for happy repayment so that you can save huge taxes on it, and it won’t give you chances to regret. By saving a huge tax on your interest, you will be able to strengthen your financial status, which will make your life secure. There are several ways through which you can cut down on your interest rates. Below are some of the effective and powerful ways to save tax on your home loan repayments;

Reduce loan tenure:

The longer the loan tenure, the higher the interest. With a strong credit history, you can request that your lender make changes to the loan terms. With shorter loan tenure and high EMIs, you pay off your debt sooner, which prevents you from paying a higher amount on interest further. However, you must keep in mind that reducing the loan tenure can push you to pay higher EMIs, thereby causing a monthly EMI burden. Therefore, choose a loan with a shorter term since it will be repaid in full more quickly. It’s important to realize that a bigger interest payout does not always equate to a higher interest rate. In the long term, only the absolute interest payment rises.

Always make timely repayment of EMI:

Timely payment of EMI is very important, as you will be charged for delayed payment, which will cause a financial burden on you. It will also reflect on your credit history. So, make sure that you are making timely repayments. Timely repayment prevents late fees and accumulated charges.

Registering for the Auto-pay option can be yoursaviorr:

Delay payments of EMIs can cause debt accumulation and lead to late payment charges. Hence, the accumulated charges and late fees together can put pressure on the borrower. Also, not paying your late fee can negatively impact your credit score.

For timely payment of EMIs, always register for a debit mandate. A debit mandate is a handy option that automatically pays your EMIs before the due date from your registered bank account. It will calculate the home loan repayment schedule as well as orchestrate your repayment process in a hassle-free way.

Part-payments are wise options:

You can always go for part-payments, which can reduce your loan burden significantly. Whenever you have surplus funds like bonuses, gifts, or any extra income that you could manage to generate, go for part payments, and it will be your savior by saving your interest.  Some lenders take part in payment charges. So, always discuss it with your lender and be clear if there is an opportunity to prepay a part of your loan before the tenure; it can reduce the overall interest payments. So, one part is the best option to cut down on huge interest rates.

Consider loan transfer:

Due to huge competition, banks keep offering attractive interest rates. If you are getting a good offer from a new reputable lender, calculate repayments, go for a cost-benefit analysis, new interest rates, and loan transfer rates, and switch to a loan transfer if it gives you scope for saving a substantial amount of interest. Hence, you can get your home loan balance transferred to the new lender for multiple benefits. Always do research while choosing the right lender so that you can avail the offers and benefits to the fullest.

Switch to MCLR:

Home loans taken before April 2016 can switch to Marginal Cost Funds Lending Rate (MCLR), subject to tax and conversion fees. Home loans taken after April 2016 follow the Marginal Cost of Funds Lending Rate (MCLR), where the borrower can benefit from the changed interest rates.

Additional EMI payment:

Some employees get an annual increment and bonus, which can be used to pay extra EMI, which can save interest and help you repay your loan faster. In addition, you have the option of making an additional EMI payment every year. It’s a smart strategy to shorten the term of your loan and save money on interest this way. However, you can use the EMI calculator to calculate the monthly EMI easily.

Go for debt consolidation:

It simply involves taking out a new loan, often with a cheaper interest rate, to pay off many obligations. It lessens your financial load and assists you in managing your debt effectively. Through a debt consolidation loan, you will be allowed to take a new loan by combining all your existing loans for better terms, such as lower interest rates and longer loan tenure. Consolidating all your loans can reduce your interest rate, which will help you to repay your loans quickly.

Apart from the above tip, you too can reduce the interest rate by making higher down payments, you can also pay more EMIs every year, ensuring the quick payment of the principal amount. The lesser the principal amount, the lesser the interest amount to be paid.

It will increase your EMI by 5% every year and can be a smart choice to reduce your interest burden. Keep looking for interest options that are low ao complete research, and select the financier’s offers with the lowest interest rates.

Remember to go with the EMI option that you can afford; otherwise, it will cause unnecessary delay, which will further lead to late charge payment. Hence, choose everything wisely so that you won’t have to repent later by paying a colossal amount on your home loan repayment interest.

Why is tax saving important?

By proper tax planning along with income tax return, you can not only reduce the tax liability but also end up saving a huge amount of money, through which you can make your life better, richer, and secure by achieving various goals in life. One of the benefits of tax saving is that you can avail of deductions for a variety of long-term purchases. There are tax-saving deductions in the Income Tax Act for interests accumulated in home loans. So, the benefits of tax saving are many.

• Tax savings can protect your finances in the long run.
• Tax saving helps in building a corpus, which you can use to achieve your short and long-term goals.
• It reduces your financial burden.
• Incorporating tax-saving investments into your portfolio early on gives you an advantage for the future.
• Tax saving through your housing loan interest deduction can help you save money and repay your loan faster.
• Planning for tax savings helps in syncing tax investments with cash flow.
• Tax saving helps in financial planning. Most of the investments eligible for tax savings are mid-to-long-term tenures. These investments align tax savings with long-term financial goals.
• Tax savings also help you optimize tax outflow for a sudden bump in income,e like a bonus or promotion.

Hence, tax saving is always a matter of utmost priority while you are making plans for your housing loan repayment.

Tips to choose the perfect bank

You make the biggest financial decision ever in your life while buying a home by taking a home loan. Once you finalize the house you want to buy, the next step is to find a suitable financial institution that will provide you with a loan in a hassle-free manner. Banks play a major role in streamlining your financial requirements. Hence, always choose the perfect bank. The following are some tips on how to choose a perfect bank;

Turnaround time:

Always choose a bank that takes less time to process and disburse your home loan. A bank with a good reputation always takes less time and provides good customer service.

Less documentation:

Some banks process your loan with less documentation. It is better to choose a bank that avoids excess documentation work and only looks for age proof, identity proof, and income proof.

Loan amount and eligibility:

Based on one’s monthly income, the loan is decided, and the loan amount is granted based on 80%-90% of the property value.

Processing fee and repayment terms:

This is another parameter to choose your bank wisely that offers the lowest processing fee. It will cut down on extra expenses and save you a lot of money.

Revision in the loan rate:

Always keep a check on your bank to see if the change in the interest rate has been implemented or not. This change in the interest rate is made by the Reserve Bank of India. Those who have opted for a floating rate of interest must choose a bank that implements the changes as soon as policy revisions are announced.

The rate of interest:

The EMI calculation always depends on the rate of interest on the home loans. Try to get the lowest interest rates on home loans. You must opt for fixed or floating interest rates. If the interest rate falls, you must go with a floating interest rate; if the interest rates rise, you must opt for fixed interest rates.

Good and prompt customer support:

Always choose the bank based on the way it treats its customers. Go for a bank with responsive and prompt customer care support.

Also, take opinions:

Always take the opinions of people, ask your friends and relatives about their experience with various banks, and it will help you make the right decision.

As the competition has increased, you get attractive interest rates from many lenders even if you have an average credit score. However, it is necessary to compare different lenders in terms of interest rates, processing fees, late payment fees, and other terms to choose the best for you. It is important to keep doing research and to stay updated so that you can take advantage of better offers.

How can NoBroker help?

NoBroker, along with its plethora of services, always emphasizes public empowerment and welfare through knowledge enhancement, for which it shares complete information on a wide range of topics, including home loans and tax reduction on home loan repayment etc.  NoBroker is a name that you trust, which makes your life richer and better. This blog will give you multiple tax-saving ideas on your housing loan repayment, which will not only reduce your financial burden but also it will save you money.

Repayment of a home loan is a crucial stage as it leads you towards gaining ownership over your property after clearing all your debts. NoBroker has made it all easier through its detailed information on how to save tax on your housing loan repayment, which helps you to save money and repay your loan fast.