You can pay off your mortgage faster if you have a plan in place for investing the money you save each month.
Home ownership is a key life milestone, and many people in India use mortgage loans to attain it. Home loans enable individuals to realise the ideal of homeownership, but they sometimes have long repayment periods and exorbitant interest rates. You can pay off your mortgage faster if you have a plan in place for investing the money you save each month.
This, however, requires careful thinking and prudence with regard to your financial holdings. Increasing EMI payments, investing in fixed deposits, mutual funds, recurring deposits, PPF, direct stock investments, and taking advantage of windfalls are all efficient investment techniques that may speed loan repayment. Let’s look at some smart investing options that might help you pay off your mortgage faster.
An increase in monthly payments
Your Equated Monthly Instalment (EMI) payments may be raised in a simple and efficient way. If you can afford to pay more than the minimum EMI each month, you may shorten the term of your loan and save money on interest. If you want to pay off your loan faster, you should evaluate your spending habits and consider raising your EMI payments.
If you wish to prepay but don’t have the money, you may do so by increasing your EMI by a few thousand rupees. This serves as a little down payment. Adhil Shetty, CEO of Bankbazaar, adds, “It also keeps your savings free for investment.” Investing is one strategy to make more money. Making little prepayments allows you to pay off debt faster. If you apply this technique, you won’t have to choose between saving and investing. This is preferable than choose just one.
Putting money into fixed deposits
If you want to pay off your mortgage faster, you may put your funds into a fixed deposit (FD). Fixed-income investments give a regular and predictable rate of return. Choose FDs with shorter maturities if you want the money to be available for prepayments at the end of their terms. Using the accrued interest, the principal may then be returned sooner.
Methods for Investing in Mutual Funds Systematically
Another alternative is to invest in mutual funds gradually using a Systematic Investment Plan (SIP). A SIP allows you to invest a certain amount in a mutual fund on a monthly basis. If you’re looking for long-term growth, equity mutual funds are the greatest option. You might use the money you saved to pay down the principle and interest on your mortgage.
Assurance for the Public Good
The PPF is a government-sponsored long-term investment plan that provides competitive interest rates and tax advantages. You should register a PPF account and make the maximum annual contribution. You might considerably prepay your mortgage with the money you get at maturity to minimise the amount of interest you pay overall.
Direct Stock Purchase
Investing in the stock market may be beneficial if done with prudence and understanding of the market. Invest in the stock of firms with good fundamentals. If you have a lot of money, you may utilise some of it to pay off your mortgage early. However, keep in mind that there are hazards connected with stock market investing.
Profit from unanticipated fortune.
Any monetary incentives, windfalls, or other unanticipated awards should be carefully arranged for. Spend most of it towards early mortgage payments rather than treating yourself. These big payments may significantly lower the principal amount, resulting in significant interest expense savings throughout the life of the loan.
If you have a lot of debt, you should prioritize paying it off. Mortgages and other large, high-interest commitments must be paid off first. “However, consider both the benefits and drawbacks,” Shetty recommends.
However, before making any investing choices, you should examine your risk tolerance, financial objectives, and consult with a financial expert. Early mortgage payoff is a goal that is possible with the appropriate investment plan and cautious money management.
