NRE Housing loan partial pre payment or invest in FD!

POSTED BY Siva Kiran ON September 13, 2012 3:13 pm ONE COMMENT

hi ,

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


One reply on this article “NRE Housing loan partial pre payment or invest in FD!”

  1. BanyanFA says:

    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.

    Banyan Financial Advisors

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