Which is the best time to Prepay Home Loan? Whether it is during the first few years of loan tenure? Is it wise to invest somewhere rather than repay the loan? Are we really saving the home loan interest by prepaying? Let us try to answer these questions by taking a simple example.
Many of us have home loans and due to the recent uptrend in inflation and interest rates, most borrowers are thinking or in a dilemma of whether to prepay the home loan.
Which is the best time to Prepay Home Loan?
I know many of you may have already a readymade answer to this question that if the loan is fresh, then it is valid to prepay. However, what is the opportunity cost of not paying a home loan and investing somewhere else? Is it equal to the home loan rate or less than that?
The purpose of this post is to highlight this opportunity cost. This means if you invest the lump sum rather than prepaying the home loan, then what should be your ideal break up?
Many randomly assume…