How to Save Practically for Your Home Loan EMI

Having a house of your own gives one a totally different feeling. Not only do you have an abode you call your own but also there are no worries that one goes through when living as a tenant.

couple in  front of one-family house in modern residential area

There are ways when you can save on your home loan. Here are some:

1.   According to the Income Tax Act, Section 80 C considers the principal of the home loan as investment. In all your investments, for example, fixed deposits, home loan principal, ULIPs, PPF/NSC/Notified Pension Funds, Equity linked savings scheme, life insurance premium, etc; you can earn an exemption of up to Rs. 1 lakh. If the principal repayment amount of your housing loan exceeds Rs. 1 lakh, you are not required to save under any category. Also, this break from tax is applicable if you are living on the property and not otherwise (for example if the house is still under construction). However, it can be treated as an exception if you are residing in a different city.

One thing to note is that in home loans, the principal element of your EMI increases- in the beginning it is very small but towards the end it forms a major chunk of the EMI.

2.  Section 24L of the Income Tax Act says that tax benefits is independent of home loan interest. Under the category, “Income from House Property”, the interest element is considered as an expense of the income tax return. While filing, the interest paid can be shown as a negative amount, so it is deducted from the taxable income. The exemption for it is Rs. 1.5 lakhs. If your property is under rent, you can claim the incurred interest at actual (greater than Rs. 1.5 lakhs).

3.  One wise option to save practically, on the easy monthly instalment of your home loans is to transfer the amount of your loan to a bank that offers the lowest rate of interest. This will benefit you immensely as it will reduce the amount of your EMI.

4.  Watching unnecessary expenditures is always a sound advice. Cut down your expenses that you think you can or curtail frivolous spending. For example, why watch a movie at the theatres when you can easily rent a DVD or order it on your digital TV provider. Eat less outside or at less expensive restaurants if you can enjoy a good meal at home.

5.  Stay economic. If you are choosing between a four wheeler and two wheeler for the commutation purpose, it would be better option to choose a two wheeler, since it cuts down the fuel cost. Likewise, turn-off the electrical appliances at your home if you don’t need them (air conditioners, coolers, refrigerators, etc.)

6.  Take up a part-time job. Part-time jobs not only are an added source of income, they also do not require as much time and energy as a full-time jobs do. Therefore, in order to pay your EMI’s, part-time jobs are good. After all, who minds extra help?

7.  If a live with your family and have family members/siblings/uncles or aunts that are able and qualified, suggesting them to help you with the payment of EMI’s will not be a bad idea. More helping hands means greater income.

8.  Minimizing your bills will also help you greatly in this regard. Cut-down the use of electricity (remember to turn-off the lights and fans of the rooms, after using them), water (running/leaking taps, and the amount of water used in cleaning and washing clothes should be checked), phone bills (switch to prepaid, and avoid long hours of telephonic conversations), etc. Also, you can avoid the expenses incurred on hiring a maid, by distributing household chores amongst the family members.

9.  Start working from home. If you like teaching, you can take-up tuitions; if you enjoy cooking, you can start a tiffin centre, or begin cooking classes; you can even open a day care centre for kids, etc. This will generate you a good amount of income.

10.  Also, you can negotiate with your bank, to reduce the rate of interest. Sometimes, such things are flexible and negotiable, with bank policies.

11.  Other factors that can help you save practically on your EMI are:

  • Seeking advice from a financial advisor to draw a well-formulated plan.
  • Formulating a short-term and long-term budget plan and sticking to it.
  • Combining: your budget plan and saving plan.
  • Comparing: the cost of items and purchasing them.
  • Lessening: the use of credit cards and preferring payments in cash.
  • Reassessing one’s insurance and medical policies in order to avail the best one.