DIFFERENT ASPECTS OF PREPAYMENT OF HOME LOANS


Prepayment is kind of early repayment of a loan. It can be paid both in part or in a full way by a borrower. Sometimes, people get into the oscillation stage when they have some additional liquid cash in their hands and they thought for prepaying existing home loans or invest those in other financial instruments. But before getting into a dilemma they should ask themselves if they are paying interest on home loan which is too high or not. They can compare the interest which is applicable to a particular home loan after subtracting tax savings with the expected returns from fixed deposits or equities. Basically fixed deposits are lower than the rate of interest in home loan, while on the other hand, equities can deliver higher returns but these are uncertain in short term. The Home loan Schemes are available for Concorde Mayfair Project, an upcoming residential apartments in Medahalli, Bangalore.
 
Concorde Mayfair
Concorde Mayfair

Tax benefits on home loans


Several tax benefits can be availed on home loans. Under section 24 of the Income Tax Act, if the property is self-occupied, Homebuyers may claim a reduction of Rs.2lacs on home loan interest. These deductions of income tax include 30percent of the income which comes rent. It also counts the municipal taxes and interests which are paid on home loan, in case of rental property. A person who falls under the highest tax bracket, this provision can subtract taxes of around Rs. 60k in a year. The people, who are buying home for the first time, they will get an extra deduction of up to Rs.50k over deduction of Rs. 2lakhs according to Section 80EE. In case of the Principal component of EMI, Section 80C proposes up to 1.5lacs which is basically beneficial. If any person is in oscillation, then he can use this section for other investments like PPF, mutual funds, ELSS etc.


Reducing either EMI or tenure of home loans:


If anyone plans to prepay the home loan, then the advantages contain savings on interest expenditure, financial stability, effect on credit rates and deduction of principal outstanding. Customers should choose carefully before buying any home loan.

Supposedly, anyone decides to use Rs. 2lacs for the prepayment of home loan. Now, if the duration of the loan remains the same, his EMI would fall by Rs.2k per month. If the EMI remains unchanged, the duration of that home loan would jump from 20years to less than 18 years. So, it is up to the customer if he wants to reduce monthly EMI or deduct tenure on that loan. But it will be a wiser approach if the duration of the loan is reduced and the EMI remains unchanged.

                                          So, while prepaying a home loan, one thing should always be in concern
That putting all the income into home loan is not a wise decision. They need to look after the other important issues like – children’s education, buying car etc.
Location: Madras Bombay Trunk Rd, India

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