Should you prepay your home loan or invest the money?
Feb 12, 2014
Source : The Economic Times

 

DELHI: The home loan EMI is divided into interest and principal repayment, and the proportion of each changes over the years as the interest component falls and the principal rises. So, if Kamat prepays the loan, he will find a large amount of principal still outstanding, while the interest would already have been paid, assuming full term. When a loan is paid in part, the EMI for the remaining period is reworked. However, this is also based on the assumption of a full-term repayment, where the interest is front-ended.

Kamat might find that repaying the loan will shrink his personal balance sheet since only the house will remain as an asset. If, on the other hand, he invests the money, his asset base will diversify and become bigger. Given the stability in the couple's income, Kamat should have no problem paying the EMI. If there is a risk, he will not need to sell the house, but can sell the investment to repay the loan as required.

Kamat should ensure that his investment does not grow at a rate lower than the one paid on the home loan interest. He should also ensure that the money is kept in shares, mutual funds or other instruments, which can be sold when required. The investment can appreciate over time and be available for other needs compared with the investment in house, which is not flexible and cannot be used as required.

 

 

 

                   

 

Latest Realty News

Things to know before you buy your home
Feb 12, 2014
DELHI: Getting into real estate investment without a proper understanding of what you aim to achieve is not advisable. There are many risks involved in real estate investment. However, with the right data and advice, you can definitely succeed in property investment. Here is a general blueprint.
Work speeds up on Dwarka Expressway in Delhi
Feb 12, 2014
DELHI: There is good news for investors and end users who bought property along the 18km-long, 150-metre-wide Dwarka Expressway in Gurgaon with the latest estimates saying that the project is likely to be completed by the end of this year.
The effect of policy on residential real estate
Feb 12, 2014
DELHI: Post the 1991 liberalisation policy, India began to welcome various multinational corporates that were seeking permission to commence operations locally. Being the financial and commercial capital of India, Mumbai was the first city to witness a significant influx of large multinational firms.
DLF may not gain much from stake sale in Aman Resorts
Feb 12, 2014
DELHI: The stake sale in Aman Resorts may not have a significant impact on the earnings of real estate developer DLF. Despite several asset sales in the past, DLF's stock has halved in the past one year due to the company's weak operational and financial performance.
Realtors seek tax breaks for home buyers, builders to beat sluggish demand
Feb 11, 2014
DELHI: To beat a sluggish demand, real estate developers have sought tax breaks for home buyers and builders that could help boost sales as well as speed up new launches.
Intellectual property rights: US set to punish India
Feb 11, 2014
DELHI: It's not looking good between New Delhi and Washington. Tensions over the Khobragade episode are yet to fully dissipate, but the two sides are locking horns again over intellectual property rights. The Obama administration is scheduled to announce unspecified ''trade enforcement action'' against India on Monday evening (Tuesday am IST) Washington time.
DLF to get Rs 700-crore refund from DDA
Feb 11, 2014
DELHI: Realty major DLFBSE -0.49 % will get a refund of around Rs 700 crore from the Delhi Development Authority (DDA) for returning a 35-acre plot of land it had acquired in 2007 in Dwarka to build a convention centre, a senior company executive said.
DLF gets Rs 676 crore refund from DDA after settling disputes
Feb 11, 2014
DELHI: Realty firm DLFBSE -0.42 % today said it has received a refund of Rs 675.81 crore from DDA following the scrapping of a project to develop an international convention centre in the national capital.
DLF may not gain much from stake sale in Aman Resorts
Feb 11, 2014
DELHI: The stake sale in Aman Resorts may not have a significant impact on the earnings of real estate developer DLF. Despite several asset sales in the past, DLF's stock has halved in the past one year due to the company's weak operational and financial performance.
Gurgaon: Sector’s growth engine in the NCR
Feb 11, 2014
DELHI: Investments in real estate have been one of the greatest wealth builders in history. However, such investments have to be well gauged and thoroughly researched, a report by DTZ says. Over the years, a few micromarkets in the Delhi NCR have emerged as destinations for future investments, which are not only providing relative affordability but are also undergoing significant transformations owing to infrastructural development, improving connectivity, and the potential to attract real estat

Latest Realty News Of State

Realty Talk's