Should you prepay home loan or invest money? MintGenie explains

livemint.com:

There is a strong possibility that the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will maintain a hawkish position on the repo rate in December 2023. The existing fixed repo rate of 6.5 per cent in India has resulted in a standstill in home loan rates, posing a dilemma for numerous borrowers regarding whether to prepay their loans or persist with their investment strategies.

The reason behind this is that with a long-term home loan, the interest paid over time often surpasses the principal amount, leading to a substantial repayment at the loan’s conclusion. One highly efficient method to substantially reduce repayment is through prepayment. This not only results in a considerably smaller repayment amount but also significantly shortens the loan duration.

Settling a home loan early, particularly for extended durations, can yield substantial benefits, including decreased interest payments and a shortened loan tenure. Here’s an analysis of the primary advantages:

Diminished interest expenses: The most apparent benefit of prepayment is the reduction in interest costs. Settling a portion of the principal amount in advance diminishes the outstanding loan balance, consequently lowering the total interest paid throughout the loan term. This can result in significant savings, particularly for extended loans with elevated interest rates.

Abbreviated loan duration: Prepayment enables you to expedite the repayment process, thereby reducing the total loan tenure. This translates to an earlier attainment of a debt-free status, freeing up your monthly income and enhancing your financial flexibility.

Enhanced financial security and peace of mind: Settling your home loan in advance alleviates your debt burden,