A home loan is something that most of the people avail. Therefore you must not feel shy to accept the fact that you are paying a good amount on a monthly basis to the bank. But, there are people who don’t wish to carry the burden of EMIs for a longer period. Thus, they try to pay some amount of the home loan in advance or in Lumpsum.
This advance payment is known as the Prepayment of Home Loan. So, if you are also thinking to deposit this amount then here are the four things you must consider before doing so.
- Check for Future Funds Requirement
We all have fund requirement in present and future. Thus, you must check whether you need to save the surplus money to carry out something important the coming days. This is important to check because the home loans are available at cheaper interest rates in comparison to the gold and personal loans. It is so because a home loan is easier to afford in comparison to the personal or gold loan. So, you must ensure to have a surplus amount for future expenses even after making the prepayment of the home loan.
- Keep a Track of Tax Deduction
The tax rebate is upto two lakhs per person. Therefore, you must cross-check if the prepayment of home loan brings down the home loan amount below the given figure. If yes, then you are eligible for the tax deduction under section 24(B).
- Processing Charges for Prepayment of Home Loan
Some financial institutions ask for the processing fee or charges for making the prepayment of a home loan. Although this is different for both, the home loan under the floating interest rate and for the home loan that falls under the fixed interest rate. But, now the National Housing Bank has disapproved the charging of prepayment penalty on any kind of home loan. Similarly, the Reserve Bank of India [RBI] has also notified all banks for not charging a Prepayment penalty on the floating rate loans whereas the similar is not applicable for fixed interest rate home loans.
- Do Not Prepay Home Loan with Alternate Investment Savings
If you have received money from the maturity of bonds or any other investment then don’t use this money for making a prepayment. Keep this money for the emergency purpose. Anyways one has to pay the monthly EMI for a home loan for the fixed period of time. Therefore, you must not use the surplus money alias saving to bring down the home loan payable amount down by few folds.
These points will help you save money while paying the home loan EMI on a monthly basis. Also, this four-point Programme proves beneficial to save while waving-off the home loan amount in a timely manner.