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POSTED BY ON October 22, 2012 3:41 pm COMMENTS (7)
Hi,
I have taken home loan of 30L and current outstanding amount is @25L..
Is it would be a wise decision to retain the home loan to save the tax (10% slab) and subsidy
1) Tax saving will be for both applicant and co-applicant (10% slab)
2) Subsidy on interest @60K per annum- currently receiving from company to the applicant only not for co-applicant
or should i focus on re-payment and subsequent closure of Home loan
Kindly guide
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Dear Jayant, what’s the ROi in your home loan?
Thanks
Ashal
My answer to this type of question is simple.
Case 1: Dont pre pay
* Vey important Point.If you have a job which is consistent and you are sure not to loose it in next recession
* If you can use the money which you saved without pre paying effectively create enough returns that match or closely match the Interest of your loan
Case 2:Pre pay
* If you are unsure of your job and the income stream you are currently having.
*If you are going to put that extra money in a FD and never going to transfer to other asset class like real estate or equity.
But the question remain the same, do we take home loan to save tax? Never!
Paying the home loan at once will save a lot of interest. This interest amount can be invested in mutual funds, debt funds, PPF, etc. Also paying home loan relievs you from burden, make your life comfortable. Also if you need any loan for any other purpose later on its easy to get it when you dont have any loan.
Just ask yourself, did you take home loan to save tax? If you are so concerned about tax saving then why not PPF?
30L is not a small amount and you will be paying large interest amount if you retain the loan. Also does it make any sense to drag a huge home loan burden if you can really pay it?
Very true; if u calculate the total tax saved by both the applicant plus the subsidy, off-course as you mentioned the difference is more at this time but if i stop re-payment retaining @15L then still there will be difference but not huge
10% tax slab will save you some tax saving . Are you able to invest in those things which can offer you more than the interest part ? If yes, I think prepaying can be a good option .
Can u plz elaborate on this “” Are you able to invest in those things which can offer you more than the interest part ?””