Home Loan Calculations: How 5.45% increase in EMI can save your Rs 16 lakh in interest and 4 years in duration on Rs 51 lakh, 25-year loan
Home Loan Calculations: By increasing your EMI by just 5.45 per cent, you can reduce your loan tenure by 4 years and save Rs 16.72 lakh in interest payments.
Buying a home is a big milestone, but those long loan tenures and hefty interest payments can feel overwhelming. What if a small tweak in your EMI could help you close your loan faster and save a huge chunk of money? By increasing your EMI by just 5.45 per cent, you can shave off 4 years from your Rs 51 lakh loan and save Rs 16.72 lakh in interest. Sounds like a win-win, right?
Here’s how a minor adjustment can help you achieve financial freedom sooner.
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(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
A small EMI increase, a big impact
A minor adjustment in your home loan EMI, increasing it by just 5.41 per cent can help you close your loan 4 years earlier and save Rs 16.72 lakh in interest payments.
The standard home loan structure
For a home loan of Rs 51 lakh at an assumed interest rate of 9.5 per cent over 25 years, the monthly estimated EMI stands at Rs 44,559. In this scenario:
- Total estimated interest paid: Rs 82.67 lakh
- Total estimated repayment amount: Rs 1.33 crore
The smart move: increase EMI by 5.45 per cent
By increasing the EMI to Rs 46,989—a 5.45 per cent hike—the loan tenure reduces to 21 years.
The new repayment scenario
Under the revised EMI plan:
- New loan tenure: 21 years
- Total estimated interest paid: Rs 65.94 lakh
- Total Repayment Amount: Rs 1.16 crore
The savings breakdown
By making this small EMI adjustment, you save:
- Rs 16.72 lakh in total interest
- 4 years in loan tenure
How does this strategy work
Increasing your EMI means:
- More of your monthly payment goes toward the principal rather than interest
- Faster repayment means reduced interest burden over time
The power of compounding interest
In a long-tenure loan, interest accumulates significantly over the years. By shortening the tenure, you cut down on the compounding effect, saving a substantial amount.
Is this strategy right for you
- If you have a stable income, this strategy may be highly beneficial
- The slightly higher EMI is manageable compared to long-term savings
Amount saved can be invested
Instead of repaying your loan till 2050, you could be debt-free by 2046, allowing you to:
- Invest in other assets
- Plan for early retirement
- Reduce financial stress
Final savings on interest outgo
By reducing tenure from 25 to 21 years, you save Rs 16,72,584 in total interest payments.i