A guide to Home Loan prepayment
Everyone dreams of buying a beautiful home. It not only provides them with the perfect shelter but helps them to elevate their social status. But you might start considering whether a prepayment is the best idea to opt for in terms of home loans. Well, if you are unable to analyse that, we are here for you
When dealing with home loans, you can have a hard time understanding whether it is best to invest in a home or make the prepayment. That is why a few crucial factors need to be considered to make the right decision. This will include principal repayment, remaining tenure, return investment rate and even interest loan rate. But for starters, you need to estimate the opportunity costs. Once you have done that, you need to recheck and analyse if what you are doing is the best decision. You can also check housing loan eligibility at this point.
When Should You Make Prepayment On A Home Loan?
In many cases, it is best to make a prepayment than invest. If you use high-ticket loans, you will successfully save taxes. This can be done for both accounts of interest and principal repayment amount. So, if you persist in using a loan, you can save up on the tax like never before. But do not forget that there are certain restrictions on the same.
For starters, your tax benefit cannot exceed Rs. 2 lakh of interest payment. This may be the case for a specific financial year. If such a thing occurs for any reason, partial repayments can come to your rescue. It works well to decrease the outstanding, which will foster you to make the best use of tax benefits without any hindrance.
When Should You Avoid Making Prepayments On Home Loan?
You should avoid making a prepayment whenever you notice that the home loan amount might not be high. This may also happen when you prefer tax-saving. Apart from this, if there is a situation where both partners can get tax benefits separately, the loan amount will be better. But if the amount is taken as a joint entity, then the partners can obtain the interest deduction benefit at Rs.2 lakh each. So, you will not have to prepay. You must also note that the main advantage of prepayment is always to decrease the interest outflow. That is why if you are looking to estimate your monthly EMIs, it is a good practice to use a housing loan calculator.
The Bottom Line
Prepayment can require you to pay sufficient attention to important sectors of your home loan. So, make sure you read this article carefully for the ultimate information. You are bound to receive all the help from here that may improve your knowledge on this. Read all your documents carefully & learn about the prepayment charges before applying for home loan. Also, you can apply for the home loan at Standard Chartered Bank. They have lower prepayment charges for home loan.