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Continue Loan If Home Loan Rate is lower than Earnings Rate
by Aman Jawanda Financial Service ProviderIn the coming housing period, it is expected that the housing rates will go down. So this is good news for the persons who are looking forward to taking the home loans in the coming quarters. Those who are paying high rate should not stop if the home loan rate is lower than the earnings rate.
There are some factors that one should keep in account before prepaying the home loan. If the loan amount is less than Rs.25 lakh and in that case person will have a favored rate of interest and if not, check the present interest rate to get a better interest rate. It is estimated that the home loan interest rates will go down in the coming time period.
Further, is the housing loan taken for an individual house, resale property or for under construction property? In the first two payments, buyer is eligible to claim the benefit of interest paid under the Income-tax Act, though the last option; one can claim this interest benefit after the ownership of the property. And until that the interest rate is equal to or lower than the earning rate from other investments, one should go on with the housing loan. And of course, buyer also needs to keep in account on the liquidity.
Chances of debit savings or EPF yielding a higher payment return or even matching the housing interest rates (if it is efficient for tax) is low, and if it is true, buyer should consider down payment of the loan. And in parallel, home loan consumer insurance cover is not enough and does not even wrap the housing loan, left aside the further safeguard for their family. So even if consumer prepays the loan, He/she need to enhance the life cover; considering a long term plan. At the same time, buyer must think about buying a life insurance for himself or his family, even if the employer provides that.
The extra finances can be invested at the right place in an equity Mutual Fund. Focusing on existing investment, buyer can think multi-cap funds, where Funds like Templeton India Growth and Prudential Dynamic are a good option. However, to ensure any investments in the equity asset class is intended for the long tenure and minimum horizon considered is five years. As stated above, borrower can stop their debit investments as that part should be used to prepay the entire loan and as an alternative consider balanced and hybrid funds such as HDFC home loan balanced, which also provide constancy to the portfolio. Only if, the buyer is using the debit portfolio for short-term needs or liquidity, he should not stop.Sponsor Ads
About Aman Jawanda 
Financial Service Provider
28 connections, 0 recommendations, 76 honor points.Joined APSense since, November 3rd, 2012, From Delhi, India.
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