Is it advisable to repay part of the home loan if no prepayment charges are levied out of salary income, given that interest rates on home loans are steadily going up?
Manoj Bhargava, Pune
Under most circumstances it is better to prepay your home loan if you have spare cash. The circumstances where you would have to think twice before prepaying the loan are: First, when the interest rate on your home loan is lower than the prevailing interest rate on savings and deposits. Second, if the principal repayment of the home loan increases the amount of deduction under Section 80C. This will happen if you are not fully utilising the Rs 1.5 lakh deduction limit under this section through other investments.
