POSTED BY September 13, 2012 3:13 pm ONE COMMENT
ONhi ,
I’m an NRE and I have a SBH housing loan of Rs20 lakhs oustanding to be paid in 14 years from now ( Original period is 20 years as on feb 2008) with an interest rate of 10.75 %
As I have Rs 5 lakhs at the moment, Im not sure if it is wise to pay this amount against the housing loan to reduce the principal ( if so how much would be reduced?) , or to save this in NRE FD ( offering 9.25% tax free). Could you please let me know which is the better option.
Thanks in advance
Regards,
Siva
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Svia,
It all depends upon your regular source of income. You always have an option to prepay your home loan – the interest rate of which are currently on down turn.
on the other hand, the NRE FD rates are also on a down turn. If you invest your excess funds currently in a tax free FD for 10 years at the moment, your returns will be locked for a long term. I do appreciate that it would mean that you are paying out an additional 1.5% interest rate to the loan, however, you always have an option to reduce your home loan later on…
Really it depends upon how much you can save. If you have a regular flow of savings, I would encourage you to book FDs. Once FD rates go down, you can then use your future savings towards repaying of home loan.
regards
Banyan Financial Advisors