Thursday, October 9, 2008

Should you prepay your home loan?

1) Liquidity:

Before deciding to foreclose, one needs to understand the implications - both present as well as future. It can hurt their liquidity in the short to medium terms, if they decide to foreclose their home loan accounts or make partial repayments.

2) The net cost of the home loan:

With the increase in EMIs, many borrowers are exploring the option to pre-pay the housing loan. Before deciding whether to pre-pay or not, one should work out the net cost of the home loan. This can be done by factoring in the income tax benefit on the housing loan interest.

3) A prepayment penalty:

Normally, banks do not charge anything in case the loans are being repaid from one's own sources. However, in case one goes for refinancing, i.e. borrows from some other bank, then a prepayment penalty is levied." To read more, please, visit - Ashish Gupta, ET Bureau, The Economic Times

Related Stories:

1) What should I do with my home loan?

2) Home loan - to avoid interest rate hikes in the near future, taking a loan from a PSU bank might be a good idea

3) Home loan - interest rates

4) To know whether your EMI will come down watch out for RBI's credit policy on October 24. There could be a Diwali gift for you.

5) Banks encourage prepayment on home loans, waive penalty

6) Managing repayment of home loans

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