Home Loan Prepayment vs new investment

Hi Pankaj, I have a home loan of 18Lakhs with EMI of 15000/-pm at 8% fixed interest for 20 years. Its over 7.5years and now am having some money to do part payment and increase the EMI say to 20K pm.This will reduce the tenure as well.As of date the interest component is more than the principal.

I have been planning to do an investment for a 1 BHK.

Now my thinking is that I should first get over of this liability and then invest in a new place.This will make me worry free for the next loan-liability.

Last month I had gone to the bank and the lady over there advised me to do the part payment and she said my thinking is right. Now this month when I had gone there the gentleman at the bank adviced me against this.He said 8% fixed is a very nice deal and it does not make sense to part pay etc although the bank would be very happy considering that its 11% today.

Now I am confused.Please advice.

asked Jun 23 '12 at 16:56 by Santosh 1122

1, Guy at Bank is rigt. As you have a fixed rate loan at 8%, it doesn't make financial sense to repay or prepay. 2. If you have extra money, go & buy the 1BHK. Take addl loan if reqd.

answered Jun 29 '12 at 11:50 by sanjay35 2261


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Asked: Jun 23 '12 at 16:56

Seen: 1,103 times

Last updated: Jul 01 '12 at 23:26