Home Loan Prepayment: Everyone dreams of having their own house, but in this rising inflation, building a house becomes very expensive. In such a situation, the option of a home loan works for people. But a huge loan becomes a burden for people. People get buried under the burden of monthly installments every month. During this time, people think about paying the loan amount quickly. Here, prepayment proves to be very helpful. Now the question arises that if you make a prepayment of Rs 50 thousand every year or Rs 1 lakh, then which of the two options will prove to be effective.
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Know the burden of EMI and total interest
If you have taken a home loan of Rs 40 lakh for 25 years at an interest rate of 8.5 percent, then your monthly EMI will be around Rs 32209. A total interest of Rs 56.63 lakh will have to be paid during the entire tenure. This means that the interest will be more than the principal.
On making a prepayment of Rs 50,000
For your information, if you make a prepayment of Rs 50,000 every year from the second year onwards, then your loan will have a tenure of about 17 years and 10 months. By this, you can save about Rs 19.52 lakh in interest. Not only this, if you deposit the remaining EMI in a mutual fund after the loan is over, then you will get a return of 10 percent. In this case, by the end of 25 years, your savings reach Rs 39.58 lakh.
On making a prepayment of Rs 1 lakh
On the other hand, if you increase the prepayment amount to Rs 1 lakh, then you will get more benefits. In this situation, your loan will be completed in just 14 years. The interest savings will reach Rs 28.56 lakh. Along with this, if you invest the remaining EMI in SIP, then your savings can be Rs 75.45 lakh in 25 years.
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Which is the better option among the two?
For information, if you make a prepayment of Rs 1 lakh per year, then it can be beneficial for you. This means saving both interest and time. But this is not always possible. Many people make a prepayment of Rs 50,000 every year, and it can be practical. Actually, the amount of prepayment depends on what your income and responsibilities are. In such a situation, it is important that you pay off the loan amount quickly. Not only this, but what are the other investments and requirements?