Home loan is a medium to long term financial plan. At the start of the EMI’s, your surplus monthly funds may not be enough, leading to lesser savings and and very limited room to take new debts like a car loan or a personal loan. But once your home loan tenure completes, your monthly surplus and savings will increase. This will in-turn allow you to take more debt and a higher capability to pay larger EMI’s.

This is when you will start making a plan to prepay your home loan and attain more financial freedom. Every time when you prepay a part of you principal, which is above and beyond your monthly EMI, you will reduce the outstanding principal resulting in the interest payable decreasing alongwith the tenure of your loan.

Under what circumstances would you normally consider prepay:

1. Considerable monthly income surplus dues to increase in salary

2. You may have saved for a particular reason which is no longer necessary, creating a surplus in savings

3. Surprise Funds like a payback or dividends or a lottery

4. Asset Liquidation like a car or another property or stocks

Why you would consider prepaying your home loan:

Psychologically relief from the financial freedom it offers: - you will feel a sense of ownership, achievement and relief once you have cleared your home loan in full. The Sense of relief and the fact that you take complete ownership of the home are the main drivers for many people to prepay their home loans

Creating a monthly surplus- Banks tend to adjust home loan prepayments with the principal outstanding. Banks also reduce the tenure of the home loan based or in some cases the monthly EMI based on the prepayment which you make to the bank.

Though it is very empowering to prepay a home loan, one needs to also look at some of the imbalances which may result from a loan prepayment which is not throughly planned, Here are some factors to consider while taking the decision to prepay your home loan.

Be Prepared for Emergencies - There is no way of foretelling what kind of emergency may strike and when, but it is better to build our financial resilience to help us tackle most emergency situations. If the Pandemic has taught us anything, it is the need to have the financial ability to handle instability. Loss of job, ill-health or loss in business are some of the other surprises life could throw at us at anytime - having a six month salary saved could be a good strategy.

Have insurance policy - Its not sufficient that your car and home are alone insured. Life and health insurance is a must for every household.

High interest loans first - Home Loans are long term secured loans and hence normally charge a lower interest rate and offer many tax benefits. Its always a good idea to prepay personal loans or car loans before your consider prepaying a home loan.

To Prepay or To Invest? - Home loans are cheap and offer many tax benefits. Many times it may be better option to invest the available surplus on opportunities which may yield higher gains compared to the interest which is being saved through prepayment.

Will it impact lifestyle? - Many times the adverse effect of being a tightwad could make you a curmudgeon. While trying to pay-off the home loan, if you start saving more aggressively to the point of you becoming a scrooge, it may impact your lifestyle and that of all around you. Postponing your family vacation, skimping on home renovation or simply not being able to afford the indulgences you and your family once enjoyed may leave you and your family unhappy.

Will it impact my other goals ? - Having a longer horizon of ones financial goals will enable you to withstand the market volatility and tide over it, while also leveraging the magic of compounding. So you should start saving for these goals early-on, higher education for children, or retirement funds have the best outcomes which you plan in your thirties.

Our intent here is not to discourage you from prepaying you loan, rather to empower you will the various aspects of prepayment so that you can take a more informed decision. Remember, life is a long road with many twists and turns and we may create undue stress on ourselves, our family and lifestyle in an attempt to prepay the home loan. Rather, nurturing good financial habits will eventually help you to clear your Loan burden along with creating surplus funds to achieve your other goals.

The 40 - 60 ZERO EMI till handover scheme offered by Frontier Living GreenField developers may help you overcome some of these worries by eliminating your interest burden till the Villa is in your possession.

NOTE : The above 40 - 60 offer is for a limited period and may be withdrawn by the builder at anytime.