Is Prepaying Your Home Loan a Good Idea?

Being debt-free is a dream for many. But financially, does it always make sense to rush into prepaying your home loan?

The Case for Prepayment

Prepaying reduces your principal amount, which significantly lowers the interest burden over the loan tenure. It also gives you mental peace.

The Opportunity Cost

If your home loan interest rate is 8.5% but you can earn 12% returns from an equity mutual fund, you might be better off investing the surplus cash instead of prepaying the loan.

Conclusion

Strike a balance. Use a portion of your bonus or surplus income to make part-payments, while continuing your investments for other goals.