Advantages Of Home Loan Prepayment: Reasons You Shouldn’t Ignore


Home loan prepayment, as used in finance, is the word for early repayment of a mortgage. As previously stated, it will help you reduce interest payments. But as one sees further down, there’s more to it than that. Millions of Indians now have an easier time achieving their ambition of home ownership thanks to mortgage loans. Here are a few reasons from Mr. Anurag Goel Director at Goel Ganga Developments why one should think about paying off a house loan early, even though it is simple to do so with manageable EMIs. Always Consider advance payment for home loans.

1. Savings on interest costs


The home loan prepayment  will help save a large amount of money during the predetermined loan tenure. The quicker you can pay off the loan, the more you can save. The interest cost is a big percentage of your home loan EMI, especially on long-term mortgages.

2. Better use of resources


Be sure to adjust for the potential cost of such savings when computing the savings as well as the actual savings. Your other life objectives, such as setting up a college fund for your child’s education or a comfortable retirement for both you and your spouse, might benefit more from the extra cash you have after prepaying a mortgage.

3. Lower credit utilisation


A house loan has a long-term effect on your credit score in addition to your money. Your credit report will be damaged by even a small blip in EMI servicing, and the danger persists until the debt has been repaid. A mortgage also increases your credit utilisation ratio, a significant factor on your credit report.
Prepayment of a house loan lowers your credit utilisation ratio and appears as a badge of pride on your credit report, which is one of its benefits. For a strong credit score, it’s a good idea to keep all EMIs, such as those from loans and credit card debt, under 30–40% of your monthly take-home pay.

4. Improve eligibility of other loans


If your credit record shows that you have a large mortgage that accounts for a significant amount of your credit usage, it becomes challenging to obtain additional loans, such as those for a vehicle, school, company, or medical expenses. You won’t be disqualified for another loan; rather, lenders could seek to reduce their risk exposure and make an offer for a much lesser sum than you require.
A compromise on the amount may not be an option for some of the need-based loans you may need in the future. If you can pay off the loan early, you may then seek loans when you really need them.

5. Unlock Home equity


For decades, real estate has been one of the most popular asset types for investment. The value of your home increases as real estate values do. These gains, however, remain hypothetical until you sell the residence. A home equity loan or home equity line of credit (HELOC) are options if you don’t plan on selling the house but still want to benefit from the value it has created.
It’s a loan or line of credit secured by the current market value of your house, to put it simply. Home equity loan eligibility criteria vary among lenders, although most will provide loans up to 70–80% of the property’s assessed value. The purpose of having more credit is to reinvest the money in assets that will provide larger profits.
The benefit of a HELOC is that it has far higher loan eligibility requirements and interest rates that are substantially lower than those on a credit card or personal loan. You are free to invest the money in other traditional assets, support your business or startup, buy more real estate, or use it for any other purpose you want. However, you must have authority over the pledged asset in order to do this, which you cannot do until your mortgage is paid off.

6. Secure peace of mind


The assurance that your house is actually yours is one of the main advantages of prepaying a mortgage. A mortgage represents decades of commitment under contract. Financial setbacks can be caused by lost earning potential, accidents, injuries, or even catastrophic global problems like war or the current epidemic. Your home might be repossessed if you fall behind on your EMI payments.
An important accomplishment is paying off a mortgage early. It gives you confidence that you can handle any additional financial difficulties and safeguard the future of your family. You should also be prepared loan repayment while you are in financial crisis 


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