How to clear your 25-yr home loan in 10 years and save lakhs in interest

Rohit & Neha Cleared Their ₹50 Lakh Home Loan 15 Years Early - Here's How You Can Too

For most homebuyers, the biggest financial burden is the home loan EMI. What many don’t realise is that in the initial years, 90% of their payments go towards interest, not principal. But with a smart repayment strategy, you can cut a 25-year loan to just 10 years, saving lakhs in interest.

 

The Problem

 

Take this common scenario:

 

Loan: ₹50 lakh

 

Interest Rate: 8.5%

 

Tenure: 25 years

 

EMI: ₹40,000 per month

 After one year, you’ve paid ₹4.8 lakh, but only ₹60,000 reduces your loan. The bank takes the rest (₹4.2 lakh) as interest.

 

That’s why so many borrowers feel like their principal never reduces, even after years of EMIs.

 

Certified financial planner Vijay Maheswari explains the strategy to finish the home loan in just 10 years: 

 

1. Pay 1 Extra EMI Every Year

 

If you pay one additional EMI of ₹40,000 annually, it directly reduces your outstanding principal.

 

This simple step alone cuts your tenure from 25 years to 20 years.

 

2. Increase EMI by 7.5% Every Year

 

Let’s say you start with ₹40,000 EMI. Next year, you raise it to ₹43,000. Then ₹46,200 the year after, and so on.

 

This increase keeps pace with salary growth.

 

Result: Loan tenure drops to 12 years.

 

3. Combine Both Steps

 

Do both: extra EMI + 7.5% annual increase.

 

Outcome: Loan finishes in just 10 years.

 

You save over ₹35–40 lakh in interest, depending on your loan size.

 

Real-Life Example

 

Let’s take Rohit & Neha Sharma from Pune, both IT professionals.

 

They took a ₹50 lakh home loan in 2024 at 8.5% for 25 years.

 

EMI = ₹40,000

 

If they do nothing:

 

By 2049, they’ll pay back ₹1.2 crore (₹70 lakh in interest).

 

But they decide to apply the 2-step strategy:

 

Each year, they add 1 extra EMI (₹40,000)

 

Plus, they increase EMI by 7.5% annually (₹40,000 → ₹43,000 → ₹46,200, etc.)

 

Result:

 

Loan closes by 2034 instead of 2049

 

They pay back only ₹85 lakh total

 

Savings = ₹35 lakh+ in interest

 

They own their home 15 years earlier 

 

Key Takeaways for Borrowers

 

•  Don’t stick to fixed EMIs for 25 years.
• Use salary hikes to increase EMIs instead of lifestyle inflation.
• Even one extra EMI a year makes a massive difference.
•  Combine both hacks → become loan-free in a decade.