Home Loan v/s Investment

Q. I have a question regarding Payment of Home Loan vs. Investment. Should a person start a SIP for his retirement or should he plan to prepay his Home Loan first. Say if a person is having a Home loan of 30L and paying EMI of 30K and having a SIP of 10K is good option or having EMI of 40K is a good option, or having a 10K of reoccurring deposit for one year and with this amount prepay his loan after each year.

Thanks

Sachin

Ans. –

Dear Sachin, in my view, Increase your EMI to 35K & invest 5K mly through SIPs for your retirement. The extra amount in EMI ‘ll help to close your loan early & the SIPs ‘ll give the power of compounding to your retirement portfolio.

Thanks

Ashal

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11 Responses to Home Loan v/s Investment

  1. Home Loan says:

    I love reading your blog, always very informative. It’s a great sense of
    Achievement when you apply something you’ve learned to a real life situation.
    Well Done.

  2. amit mittal says:

    Hi Ashal,

    I am planning to take SBI Maxgain Home Loan of Rs. 25,00,000 for an under construction property which will take 2 year to complete.
    My first disbursement will be after 2 month of around Rs. 3,80,000 and next will be after 3 months and so on till full disbursement.

    Could you please guide me for this how should i proceed.

    • ashalanshu says:

      Dear Amit, Pleaese do note, till the time of final disbursal, you can deposit your surplus amount but can not withdraw the same. Once the disbursal is full, the max gain account ‘ll be like any normal OD account & you may deposit & withdraw as per your choice. In my opinion, you may start depositing some amount on mly basis to bridge the gap. This ‘ll help you to bring down your interest outgo even in the under construction phase.

      For more details, you may mail to my gmail id directly.

      Thanks

      Thanks

  3. Chaithali says:

    Dear Ashal

    Hello

    I would like some info on a life insurance policy with following benefits:

    1. Guaranteed return of total of INR 75,00,000
    2. Term = 20 years
    3. Should have death benefit
    4. Should have disability benefit

    My age is 36 years. Annual income = INR 20,00,000

    Can you tell me which policy will suit me and what would be the premium amount?

    Am looking for the least premium amount annually.

    Thanks
    Chaithali

    • ashalanshu says:

      Dear Chaithali, do you have or advised any particular policy on the parameters as pointed out by you. If yes, please post the details of the policy. If you do not have any policy on your Radar, May I ask, Why you are interested in a Life Insurance policy which is also an investment product.

      Thanks

      Ashal

      • Chaithali says:

        Ashal, thanks for the response. I do have one ULIP in my radar – ICICI’s Prulife stage wealth 2.

        I already have LICs Jeevan shree which is pure life insurance policy. The cover is actually quite less. I don’t have any other bonds where I have invested. Therefore I’d like to go for a ULIP that gives me a good cover, 75 lakhs, for total premium of 12.5 lakhs paid over a period of 5 years. At the end of 30 year time, if am still alive, I expect to get my premium with some additions like equity etc.

        What do you think about this?

        • ashalanshu says:

          Dear Chaithali, how about purchasing a simple Term plan of 75L Rs. for 30Y Term? The prem. for your age ‘ll be not more than 10-12K Rs. if you opt an online plan. So balance 2.37-2.4L Rs. can be invested else where & it ‘ll generate better return to you. Please update with your views.

          Thanks

          Ashal

          • Chaithali says:

            Dear Ashal, with the current plan, the total premium is 12.5 lakhs. (2.5 X 5) .

            Even if we forget the investment part, life cover is quite good correct? 75 lakhs for just 12.5 lakhs!!!!!

            Are there are pure life cover plans in the market which provide this kind of cover for such a premium?

          • ashalanshu says:

            Dear Chaithali, please read my reply again. I already told you, a plain vanilla Term plan of 75L SA ‘ll not cost you more than 10-12K Rs. if you are purchasing an online plan. i.e. you w’d have to pay 10-12K Rs. yly for next 30Y to get this cover of 75L Rs. You still have those 2.4 to 2.38L Rs. in your pocket to invest in pure investment oriented instruments.

            Please check online term plans of Aviva, Aefon Religare, Kotak, Metlife, ICICI Pru, HDFC.

            Thanks

            Ashal

  4. ashalanshu says:

    Dear Hasan, I’m unable to understand your reply. In first line you say – pay loan fast when interest rates are high & in 2nd line you say – pay less when floating interest rate is high.

    Please clarify the above situation.

    To me it’s no matter interest rates are high or low, partial prepayment depending upon the individual’s capacity are the way forward.

    Thanks

  5. hasan says:

    hi, it depends on the rate of interest that u are paying for your loan .. i.e if the rate is more then its better to finish off the loan by prepayments..you can also time the interest rates eg one can prepay more when the rate of interest is less and prepay less when floating rate is more. do allocate funds for mutual funds as mf investing can give u a range of 12-18%on an average.. nifty rate is arounf 17%

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