Prepay home loan vs investment

[jdhenson]

I am 30 year old, 2 year married. We both work and earn around 2 lakh a month after tax.

We bought a house last year and it's been 13 months since, the house was worth 44 lakh, and we took a loan for 28.8 lakh, the loan was for 20 years, with monthly emi around 24 k with 7.5% interest rate.

In the last year I focused on paying principle on home loan as and when possible and now the principle is down to 20.8 lakh. The current emi split between principle and interest is around 13 for principle and 11 for interest

I have a yearly bonus coming up around 2 lakh, I know that, I have the loan at low interest rate .

Wanted to know if, it's right to invest it in equity or keep on prepaying the loan and get it more down.

 

[xuyen]

@jdhenson I prepaid. Now no home loan.

Of course I could have saved on taxes. I could have kept the loan n invested in equities and earned big since the last few years have been amazing for the markets.

But i feel so much lighter and happier now. The ability to not work for a few months if I do choose has been nothing short of a blessing. No pressure of EMIs.

 

[veronica33]

@xuyen Good job.

 

[warriorjmg]

@jdhenson Me too wanted to know the answer. In the same situation. Personally I like clearling the debts first,When loan was started like in 2021 ,rate of interest was 6.85 now it is 9.8 so need to find the solution.

 

[tdpraise]

@warriorjmg If your CIBIL is 800+ you can request the branch manager to lower it down. They can bring it down to 8.35%

 

[iamjamieq]

@tdpraise Wait, is this a thing?

 

[everybodyknows]

@iamjamieq Ya it's called loan conversion else threaten them to take loan elsewhere

 

[iamjamieq]

@everybodyknows How do I find out if this is something available to me?

 

[everybodyknows]

@iamjamieq Which bank bro ?

 

[iamjamieq]

@everybodyknows Icici

 

[everybodyknows]

@iamjamieq You can reduce the existing rate of interest of your Mortgage Loan by availing our conversion option. By exercising this option, you can either convert your existing margin to the applicable prevailing margin or you can switch from a floating rate to a fixed rate or vice versa.

You can avail the benefit of the conversion facility by paying a conversion fee of 0.5%* plus applicable GST on your outstanding Loan amount, if prepayment charges are applicable on the Loan. If prepayment charges are not applicable on the Loan, Rs. 1,000 plus applicable GST will be charged as the conversion fee. Under the conversion facility, you also have the option of either reducing your monthly instalment (EMI)** and/or the Loan tenure**.

Call our Customer Care to know more about the conversion facility and the applicable rate/scheme options.

You can also visit any Loan Servicing Branch with the following documents, to avail the conversion facility:

Conversion Request Letter. Click here to download the document

Cheque/Cash for payment of conversion fees

Identity proof of applicant and co-applicant (if applicable)

Please note that the signatures of the applicant and co-applicant (wherever applicable) are required on all pages of the conversion document.

*With respect to an under construction case, for the partially disbursed Loan amount, the conversion fees shall be calculated on the outstanding Loan amount (original Loan amount less Loan amount repaid)

**T&Cs.

 

[everybodyknows]

From ICICI site... Conversion fee is not so huge .. just go and enquire

 

[tdpraise]

@iamjamieq Visit your home branch, reach out to the bank manager. They might ask you to give an application plus your salary slips

 

[tdpraise]

@iamjamieq Yes, it is. I recently came across this and I was able to bring it down by 1%

 

[everybodyknows]

@tdpraise Even 750+ also will get that

 

[warriorjmg]

@tdpraise Ok wil try this ,civil is 774.
Thanks