Should you prepay your Housing Loan EMI or invest in Mutual Fund ?
The question every individual asks post 3 to 5 years of the home loan when his earnings increases and has surplus funds
Read the Thread to know Answer
The answer is simple. If your investment has the potential to earn more than the home loan interest rate, you should invest, or else prepay !
For example,
At current rates, interest on home loans is 9% & earnings from MF 12%
If your earnings on investment are more than 9% (interest on home loan) then you should invest and not prepay
If your earnings on investment are < 9% then you should prepay your home loan
Usually, the interest on a home loan is low and returns in equity mutual funds are high if consider for a period of 10 years +
From a Taxation point of view prepayment will lead to loss of tax benefit, rather than continuing EMI is beneficial
Concluding ,
if your home loan remaining period is more than 10 years, its advisable to invest in MF giving 12% + returns
if your home loan remaining period is less than 10 years, its advisable to prepay EMI earlier as MF returns are uncertain in short term.
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