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POSTED BY ON January 9, 2013 10:54 am COMMENTS (6)
Am in a dilemma to choose between home loan pre payment and retirement corpus building.
I have been paying Rs. 36,000 per year towards LIC Market Plus ULIP (total Rs. 2,16,000).
It’s value today is only Rs. 2,46,000 after 6 years. I checked with LIC agent and found its surrender value to be same as the current value of 2,46,000
I also have home loan for Rs. 39 L with SBI Maxgain. Since the loan amount is quite high, am thinking to put this money into prepaying home loan. But that would result in nil corpus towards retirement after 7 years of experience. To make up for that, am planning to open 3 or 4 SIPs for a total value of Rs. 10,000.
Please advise if this approach is good or should i look at putting that 2L into PPF in two slabs, 1L right away and another 1L on April first week.
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Dear Daredevil13,
As the SBI Max gain is a loan given as an overdraft, it would be advisable that you use the LIC maturity money towards pre – paying the home loan. The advantage will be that a larger portion of your repayments will now go towards reducing the principal loan amount, since you have temporarily reduced the outstanding balance.
About the retirement corpus, opening 3-4 SIP would compensate for the money used towards pre – paying the home loan.
Regards,
Credexpert
you may refer the subramoney .com link referred above. in one of comment, i like one:for initial period of repayment through EMI, you are paying most as interest portion, and latter years , you pay principal by design. so for the start years, better to repay loan.
Dear deardevil, may I know yourage & other assets & investments?
Thanks
Ashal
http://www.subramoney.com/2013/01/pay-off-mortgage-or-invest/
I suggest use the money for prepaying the home loan and then start your SIP’s in 2-3 good mutual funds . What really matters is your NETWORTH , which is assets – liabilities and in any case it will be same .
Its more of a emotional thing which is happening right now , Just because you have 2.46 lacs in ULIP , you are feeling that you have some money at hand. In few months you will again have it back ..
Thats the way I would have done ..
The answer depends on your age and other factors (see article link below)
If your retirement is far away you should invest that money. You should invest part of that in equity and part in PPF depending on your risk appetite how far retirement is, how much you should save each month/year, what interest is needed to achieve your corpus.
Use a retirement calculator (use mine! ;)) to take stock of the situation and then invest.
This article throws light on this issue
http://www.subramoney.com/2013/01/pay-off-mortgage-or-invest/