Pre-paying your Home Loans? Think Twice!




A lot of us might be thinking about making part payments against our home loans. We suggest you look at the below table of savings before you take any such decisions - 

For those not adept with numbers/tables, lets us clarify in simple sentences. 

1. If we prepay 1 lac of our home loan at the beginning of each year for 5 years. Our Total "Interest Savings" come to about INR 5 lacs for a period of 15 years.

2. If instead of prepaying the home loan, we choose to invest the same in an equity mutual fund, then a fund returning 12.5% per annum, would help us create a corpus of 20 lacs.

 3. If instead of prepaying the home loan, we choose to invest the same in an equity mutual fund, then a fund returning 10% per annum, would help us create a corpus of 15 lacs.

 Before we complete - here are the few reasons why recommend delaying the Pre-Payment of the home loan -

 1. The Prepayment can be used to create your retirement corpus.

 2. Locking up your savings in your home loan delays the compounding of your money.

 3. By Prepaying home loan, you will lose the tax benefits in later years when your earnings will more. You will be sold another house in the name of tax saving.
Again the above is indicative, Pls get in touch with your financial planner before making any financial decisions. 
For financial planning and investment-related queries, write to us at dropletadvisory@gmail.com or call us at 9962399924 / 9551373455. 

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