2022 Money Moves: Why Prepaying Your Home Loan Can Be A Smart Move

As the stock market continues to fluctuate and interest rates remain low, experts are advising individuals to make the most of their hard-earned money by prepaying their home loans. With mid-cap and small-cap indices trading at a discount to their historical averages, it's an ideal time for investors to diversify their portfolios and increase exposure to these segments.

One of the significant benefits of prepaying your home loan is the tax deduction on home loan interest. This brings down the effective cost of borrowing, making it more manageable for individuals to repay their loans. However, it's essential to keep in mind the tax benefits associated with home loans.

To illustrate this point, consider a scenario where an individual takes out a Rs.50 lakh home loan at 8.5% interest rate for 20 years. The monthly EMI would be approximately Rs.43,391. By increasing the EMI by just 10% every year, an individual can repay their loan in less than 10 years.

In fact, experts like Raj Khosla, Managing Director of , recommend increasing the EMI every year in line with income growth. This strategy can have a dramatic impact on the loan tenure and provide individuals with significant savings over time.

Prepaying a home loan may be the best investment option available, as it can yield returns of 8.5-9% interest saved on the loan. As Khosla says, 'If 'a penny saved is a penny earned', prepaying a home loan may be the best investment option available.'

In conclusion, with interest rates remaining low and mid-cap and small-cap indices trading at a discount to their historical averages, now is an ideal time for individuals to consider prepaying their home loans. By doing so, they can not only reduce their debt burden but also earn significant returns over time.

2022 money moves