Hi, I have a home saver loan (25 lakhs)from Standard Chartered @7.75% fixed (20 yrs). The current outstanding is ~ 19lakhs and the available time is ~ 15 yrs. I have currently Rs. 19 lakhs parked in the home saver account. I am advised against closing the loan as it is a fixed rate loan with an attractive interest rate.
some relevant information are:
– I earn 7.75% interest on the funds parked in the homesaver account. The interest component of the emi (emi is ~Rs. 20500) goes down due to this interest earned. Put in other words, the interest compponent in the emi is the interest on (loan outstanding – amount parked in the loan account)
– Parking a lot of money in the loan account brings overall interest payable down to small amounts. Thus I am not able to make use of the Rs. 150,000 exemption available for IT.
– Interest earned by the money parked in the loan account can be used only to offset the interest on the principal outstanding.
– (Assumption) If money is parked in FD, the effective rate after tax (I am in 30% tax bracket) would be close to 7.75%
What is the best and safe way of investing this money. Please guide.
Thanks and regards,
-SK