Should You Pre-Pay Your Home Loan? Experts Weigh In On RBI Rate Cut
ChinaGoSmart CGS For those who have opted for the new tax regime, while the direct tax benefits on home loans are reduced, Kothari still advocates against pre-payment of the loan. He suggests utilising the funds, that one might otherwise use for pre-payment, in other instruments.
"This means that the loan continues to be paid out as scheduled, also fetching benefits. Investing in a hybrid fund, can yield over 7.5 to 8% return," he said.
This strategy leverages the lower interest rates on loans, allowing one's capital to potentially grow at a higher rate. The rates are low and might come down lower, he adds, implying that the opportunity for investment returns could even increase.
While the ultimate decision of whether to pre-pay and invest elsewhere or not, depends on one's financial situation, tax planning, and willingness to take on risk. The allure of being debt-free is strong but one can choose to strategically leverage low interest rates and tax benefits.
