Home Loan & Prepayments-Imp. Plz Suggest ur Valuable Opinion!

POSTED BY GAURAV S ON December 19, 2012 3:23 am COMMENTS (3)

Hello there to all & KUDOS to the admin{& members} here for d wonderful site!!

Plz Help me with my problem..My FATHER now suffering from kidney failure last 1yr..He had taken a property worth 4Lakhs in 2004 on 15yr Home loan from SBI Bank..Even I started earning now from an year & save around 10K every month d/t his ongoing treatment..I went with my father to bank & they told me to make some prepayments to decrease the principal Amount..Principal amount left is ard 2.4Lakhs..I have around 1lakh in my bank as my extra savings..So should I deposit the lumsum 1Lakh amount as per said or do something else..I vl be v.helpful for making me plan the proper strategy for how to move ahead uptill the end in this scenario..This will be a SAVING  for my father’s treatment..

Thanks..Expecting some good replies as HELP:-)

3 replies on this article “Home Loan & Prepayments-Imp. Plz Suggest ur Valuable Opinion!”

  1. Credexpert says:

    Dear Gaurav,

    We would advise you to use 50% of the savings to repay the loan. This will reduce the principal amount by Rs.50,000. Set aside the balance savings for emergency and medical reasons, which unfortunately your current situation does demand.

    Also the monthly savings of Rs.10,000 can be used to pre pay the loan enabling you to close the loan earlier – however this entirely depends on the situation regarding your father’s health.

    Regards,
    Credexpert

  2. Sachin Chavan says:

    Focus on Father’s medical expenses and don’t repay as you need money for treatment.

  3. Gaurav

    I can see that right now you have two concerns

    1. To get rid of debt as soon as possible .

    2. To make sure you start building a corpus so that you can use it in case of some issue in future.

    Now coming to point 1 , it clearly can be seen that you want to get rid of loan asap and might be tempted to pre pay it asap , but before you get into that, I would strongly recommend that you look at your emergency fund . As you are now one of the earners and also contributing to the house expenses and loan payment . Its extremely important for your family that some buffer is created which can be used incase of some emergencies.

    For that, out of this 1 lac, I would say put 50% as pure emergency fund , and rest you can use to prepay the loan . Your outstanding loan will come down by 50,000 , but your EMI will be same, and as a result of that you loan tenure will come down . THis will help you to close the loan faster . Now your aim has to be to close this loan asap . If you are able to save 10k each month , better prepay the loan each month with this extra amount and this will make sure your loan closes in just 3-4 yrs ! .

    The result of this will be that your burden from head will be out and then you can concentrate purely on wealth creation . I hope you got the point now . Let us know if there is any thing more !

    Manish

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