Early payment of home loan Vs Investment – Help me get out of dilemma ?

POSTED BY dhaval ON August 27, 2014 1:05 pm COMMENTS (2)

Hello JagoInvestor members,

I had taken a home loan of 10 lac (for 10 years) during 2012. My sole purpose of purchasing flat was investment and not for accommodation as I already have one house in the same city.

Since my plan from very beginning was to repay the entire home loan within 4 years, I had stopped investing money in MF/Equities (since 2012). Since I am falling into 20 % tax bracket and might get into 30 % bracket in a year or so, what should be my strategy –

1. Repay entire loan

or

2. Continue paying EMI (for remaining 8 years) considering the high tax bracket and thereafter start investing in FD/MF/Equities/Gold

Return on my saving (for repayment of home loan) is 8.5 – 9 %

Please share your valuable guidance and experience to get rid of this dilemma.

2 replies on this article “Early payment of home loan Vs Investment – Help me get out of dilemma ?”

  1. santy221 says:

    Considering all the tax benefits, calculate the actual rate of interest you are paying for your home loan. If it is in single digits, continue your loan and use the extra cash to start the SIP in MF. The reason is simple, there is no other loan instrument which can lend you money at single digit rates.

    If the effective loan rate is in double digits, go ahead and close the loan. You may/ may not earn more than amount by investing in equity.

  2. Hemanth Chandra says:

    Ask bank to increase EMI and try to close the loan fast…. by this, you can get the tax benefits as well as loan can be closed fast…..

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