Should You Invest in Mutual Funds or Prepay Your Home Loan?
Different real estate developers frequently think of new strategies, such as 40-60 payment plans or other special deals.
Such frequently benefit buyers by allowing them to acquire better pricing and much more flexible financing choices, whilst developers receive much-needed funds to complete their projects. Developers may provide EMI sharing options, in which they pay all or part of the interest paid by the buyer on the original amount as EMI for a set period of time to compensate for delays. If you go through the appropriate platform or during a developer’s festive promotion, you may be able to get a reduction on the per sq. ft fee.
Making the EMI installment before the deadline is referred to as prepayment of the house loan. You can assess the ultimate impact of paying a specific amount of money and how it will affect your present tenure. Borrowers should always consider prepayment because it lowers the total interest they pay on their home loan. The interest component is the biggest in the early phases of a home loan, so prepaying early on will save you a lot of money.
Mutual funds provide SIPs, or structured new investments, to allow stakeholders to invest controlled investments. Investors can spend pre-determined amounts of money to their preferred schemes at pre-determined periods. They can invest for the long-term using SIPs instead of fretting over relatively brief market swings and value adjustments. Some experts believe that putting in SIPs is a good idea because prepaying a home loan results in higher spending and no tax benefits.
Which one do you think you should go with?
- Rather than immediately prepaying your home loan, you could invest in debt mutual funds to increase your total capital base and flexibility. In this case, capital investments should be avoided if you’re looking for short-term cash. You can also change or transfer your house loan to a new lender or take out a new smart-home loan or super-saver loan to save money on your home loan.
- Keep in mind that equities markets are still unpredictable, with erratic returns. There are peaks and troughs from time to time, and you should only engage for the long term.
- Prepayment is usually a better alternative if you emphasize paying down debt before embarking on anything else and want to get out of debt quickly. Several experts suggest paying off your home loan in this method over a period of time and then investing a bigger surplus amount each month in mutual funds to try and catch up.
- If you have additional financial goals that are approaching their deadlines, you should prioritize them overpaying off your home loan straight away.
- Considered prepayment if you are still in the early stages of your house loan because you will save a lot of money on interest. If you’re towards the end of your term, prepayment isn’t a good idea because the EMI will cover the majority of the principal.
There is no such thing as a one-size-fits-all approach in this case. Here are a few other possibilities to examine if you want to increase your monthly EMI amount to pay off your house loan faster.
Remember the following circumstances
Let’s say someone moves to a new city in search of work, gets work, and then buys an apartment after a few years of renting. Assume that this person, Mr. A, has acquired a loan of Rs. 80 lakh for a period of 20 years at a rate of 6.70 percent. This equates to a monthly EMI payment of Rs. 60,592. Assume that this person has received a new promotion and three increments as a result of taking out this home loan, and that he or she has progressed up the corporate ladder and now has more money in their pocket.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.