Question 1

Should I prepay my home loan or invest in an equity mutual fund SIP?

Accepted Answer

If your expected post-tax mutual fund return exceeds your home loan interest rate, investing in a SIP generates higher net wealth over the long term. However, prepaying your loan delivers a 100% guaranteed risk-free return and peace of mind.

Question 2

How does loan prepayment reduce tenure?

Accepted Answer

Surplus prepayments directly reduce the principal balance, eliminating the future compounding interest that would otherwise accrue over the remaining loan term.

Question 3

Are there foreclosure charges on home loans in India?

Accepted Answer

No. RBI guidelines mandate that no prepayment or foreclosure penalty can be charged on floating-rate home loans for individual borrowers.