I’ve saved 5 lakhs in my checking account. Ought to I take advantage of it to repay my residence mortgage or ought to I spend money on equities? Please recommend.
The choice whether or not to prepay or not will rely on varied components. The most important issue is whether or not you’ll be able to earn extra earnings on the funds than the speed of curiosity being paid on your private home mortgage after contemplating the tax advantages accessible to you. Yet another issue which performs an necessary function is psychological causes of being debt free.
A lump sum funding in fairness is just not suggested. For those who want to spend money on fairness you must do it by way of systematic switch plan (STP) the place you set the lump sum cash in liquid fund and from there the cash will get invested in scheme of your selection.
For those who want to use the sum in a lump sum method, you need to use it to prepay the house mortgage quite than investing in fairness though the post-tax curiosity value on residence mortgage is perhaps fairly low in your case. A mortgage could be pay as you go both partly or in full at any given level of time. Some lenders could cost you a pre-payment charge on the principal quantity pay as you go. Please assess the fund necessities in close to future earlier than you are taking the ultimate determination on prepayment of your private home mortgage as in case you want fund in future, you will be unable to borrow on the fee at which you get residence mortgage. So along with contingency wants bear in mind the fund requirement in close to future on the time of paying the house mortgage past the common EMI. Lastly you must also think about the tax deduction advantages accessible on a house mortgage and the chance to deploy it at increased return than the post-tax curiosity value.
Balwant Jain is a tax and funding professional and could be reached at email@example.com and @jainbalwant on Twitter
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