About the prepayment penalty short description with link economictimes.indiatimes.com/wealth/personal-finance-news/rbi-restricts-banks-from-charging-prepayment-penalty-on-home-loans/articleshow/12711108.cms According to the RBI rule, banks are not allowed to charge you prepayment penalties on home loans.
Being a chartered accountant, in my opinion, it's always better to knock off your loan first. It's very fancy to say that you can get 15% return from index and all but it doesn't work in that way. There are no return in straight line and you may face 2 to 3 years without having return while on the other hand you are paying hight interest in initial years. Every decision should not be taken solely based on calculations only. It's good to have a good sleep if your leverage is controlled. It's my opinion only, you may or may not agree.
very true. the returns are substantial after atleast 5 years of investing in etf. until then its always a tilt between marginal gain and loss . repaying loan also increases the chances of taking another loan for another asset while etf investing won't get you a loan.
Mistake 1: You missed taxes on the 47 lakhs. Even if it is invested for longer duration, LTCG has to be calculated and reduced from the 47 lakhs. Mistake 2: when dividend payout and taxes on dividend is not even considered.( I don't know, whether you are considering 14% returns including dividend) Mistake 3: current home loan interest rate in indian bank is 8.8% (Already RBI increased interest rate thrice without publicity) Mistake 4: ETF & MF returns are subject to market risk, so you used only best returns rate for the calculation. You must project 3rd option with worst returns on ETF & MF.
my way to handle this is don't buy property until you have 40% cash with you. repay the loan within 5 years or atleast a large chunk of principal. don't invest on stocks sip etc. always invest on land like sites in outskirts of city, farm land n earn tax free income from farm land
Making money is not the same as keeping it there is a reason why investments aren't well taught in schools, the examples you gave are well stationed, the market crisis gave me my first millions, people shy away from hard times, I embrace them.. well at least my advisor does lol.,
@Billie Heeter Ury Not at all, having monitor edge my portfolio performance which has made a jaw dropping $473k from just the past two quarters alone, I have learned why experienced traders make enormous returns from the seemingly unknown market. I must say it's the boldest decision I've taken since recently
@Raul Romero The adviser I'm in touch with is ' Gary Craig Raymond ' He works with Merrill, Pierce, Smith incorporated and interviewed on CNBC Television. You can use something else, for me his strategy works hence my result. He provides entry and exit point for the securities I focus on
The problem for lot of people is to find the right investment carriers that will give the 10-15% returns. Hence in my case also I chose to put all excess in home loan prepayment.
I'm 58 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, we are finding it impossible to replace it. We can get by, but cant seem to get ahead. My condolences to anyone retiring in this crisis, 40years nonstop just for a crooked system to take all you worked for
I think it's especially difficult for retirees and near retirees, I know to focus on the long term but the anxiety when you're supposed to be retiring in 3-5 years is exhausting.
I feel your pain mate, as a fellow retiree I’d suggest you look into getting loan from "World Quest Finance, I am keep buying stocks every time they go down 2% - 5% making my average lower and lower each time.. I just spend $1000 today on one of the stocks that I own and my average now is $1.39 and current price of stock is $1.33 … Now, I just wait and if it goes more down I’ll buy more
@@yarboroughbrad3082 While saving for a retirement is an important topic, it’s at least as important as what comes next: Your plan of action once you enter retirement. No matter how well you save during the accumulation phase, it’s critical to plan how you convert those assets to income.
@@ishaandevaj5587 Every individual needs funds to grow their business. For you to be a successful entrepreneur, you need to get extra money to boost your business. Getting a loan will allow you to make an extra move to expand your business. thanks for sharing
I realized something wicked was on the way 5 years ago , but I never imagined it would be so catastrophic I worked in a big hospital for 28 years , the BOD stripped our hospital to bare-bones and cut my hours drastically. Fk this, I felt the longer I stayed in HawAii or anywhere in the US , I was digging a deeper hole. my cobra payment was $600 a month. Luckily I was 62 and could retire early and then I moved overseas. Aloha
Relying on possibility of equity returns can be fatal. As returns from equity is probable profit but loan interest is certain liability. Moreover, we should not assume that income will increase continuously and the expenses will not. This is just my perspective to repay as much principle as possible in the initial 5-7 years when the maximum interest amount is due to be paid. After this tenure, spare amount investment in equity would be a good proposition.
Hello Ma'am, In option 2, following assumptions are made which may not be true over period of 15 years of time. 1. Assumption is investment in index fund 2. Rate of return on investment is 14% throughout 15 years. Also following is not considered in calculations in option 1. Persons investment after loan payout within 5_8 years also increases..that profit is missing in gain calculation in option 1
Acche stocks choose kiya hai... Wow ... Your Love towards stocks market make us go crazy, students love towards subject depends on the teachers love towards the subject
The challenge is cash flow.. Is there a guarantee that a good cash flow will continue for foreseeable future.. In that case, it's better to invest the money rather than paying debt.. But if there is risk to cash flow, priority should be given for loan payment.. Statistically last couple of centuries, most of the business busted due to debt which they were not able to serve during bad times..
Loan on fixed asset is always better than investment in other option.... U have not taken into account appreciation of the asset (in this case House ). After 15 years value of the house will also increase ... Lets say after 15 years house valuation has increased to 1.5cr .... In india 200% increase in house valuation after 15years is very likely... In a good Neighbor.... So effectively taking a home loan or any kindy of property loan is a win win situation
Thanks for the insightful video! It shed light on the nitty-gritty of loan repayment vs. investment, including the often-overlooked factor of changes in home loan interest rates. Once again, Thank you, @CARachanaRanade Jee !
Actually in option 2, the difference is considerably(10%) more. Because over 15 year period through tax benefit on additional interest, he could have afforded to start an sip of 1500 per month for 15 years(2.7L, but yes tax benefits are also having the same compounding effect cannot be linear, but for simplicity). If he invest it in same index fund at 14% for 15 years. At the end of it, that 2.7L would have grown to 9L. So basically with option 2, it is 41.8L + 6.3L = 48L.
Just want to mention - hope everyone is also considering the rent you save or gain from the purchase. The property valuation is also a point to consider, some properties may get a 2X valuation by 7 to 12 years from purchase.
In the first option the return will be further reduced because by the time the first 15 years pass the market would have reached a new high. Index stocks would be very costly to begin with.
I was looking for this type of video as it was difficult for me to actually analyze these many angles.. Really nice explanation in easiest way. Now I can check my case by my own.😀 Thank you very much Mam!!
This sounds soo got damn foolish mam🥲🥲🥲🥲 don't give us false hopes looking at the past .. inflation has increased more than people's salary all the time🥲 if salry increased inflation has increased twice there is no way we would be able to effectively reduce years on loan🥲🥲🥲 plzz give us better option don't give us false hopes
CA Rachana has illustrated the comparison based on "absolute interest". Impact of LTCG/STCG on investment returns was not considered in the discussion. An alternate viewpoint is to take time value of money into account i.e. look at XIRR of combined EMI & SIP installments + tax saving every year + LTCG/STCG at the end. Put all the projected cashflows of EMI, SIP, Tax Saving, LTCG etc. into a spread sheet and calculate the estimated XIRR. Think of the whole scheme of things as a "single investment product" with incoming and outgoing cashflows. If XIRR is negative, it's unlikely the scheme will be beneficial. Assume Home Loan interest rate of 10% & SIP return rate of 12% to keep some margin of error, in case you go wrong on estimating interest rates.
Very nice presentation Rachana ji … it’s useful also . I am joining as an investor for ur class . I am also a lawyer and expert in taxation and laws . Very much impressed abt your efforts 🎉🙏🏻
Directly calculating the 30% tax savings on interest paid is not the ideal option because there is a 2 lakh maximum exception and most interest paid in a single year exceeds 2 lakhs. We do not receive the entire interest payment exemption. 15:25
I was going through the same confusion since last few days. But this video as answer my all queries. Thanks a ton CA Rachana Ranade. Keep the grt work going. All the best 👍
What is not being factored into all of these options and calculations is Risk - Life comes at you in a thousand ways...always better to become Debt free at the earliest possible timeframe , and is one of quickest way to build wealth afterward provided you make wise investment decisions.
Most beginners make the error of trading alone without the necessary knowledge to enable them to profit from the market. I used to be that way, but everything changed because of expert Logan. Well, I'm glad I started investing in Mr. Logan's fantastic platform since I have never looked back.
1. You assumed tax benefit on entire amount but forgot that limit is 2 lakhs 2 14% roi on equity index really? Just because index had 12% roi for last 15 years there is no gurantee the growth rate would be even better. I would suggest 10%-12% max should be optismitic as you should he little conservative on these calculations. And yes 10% vs 12% vs 14% matters a lot in long run. Also the cheapest home loans are currenty above 8% and might be even more for people with not so great credit score so assuming 7.5% was a mistake in current scenario. Please stop misguiding! After 15 years India would be matured market don't advise 14% CAGR!!!!
Thanks a lot for making this video. Now it is easy to take a decision for whether we should go with repayment of loans or investing. As my age is below 30 and I can be invested for a longer duration I will opt for Investing rather than paying loans beforehand.
Actually, being a CA, She should have also shown LTCG tax to be paid for 15 yrs investment and then shown the NET gain. she showed the tax saved with home loan interest though.
I was just looking for what to do with my home loan as the interest rates have hiked. And I saw your video got uploaded just that moment. My home loan is only aged 1 year. So I'm going to knock off as much of it as I can right now. Will reanalyze once 5 years are up or half of the principal amount is repayed, whichever comes first.
@@amolsg7 My loan is actually a mortgage loan at floating interest rate, which is at 10.2% interest as of now. Even a 12% return in mutual funds is just a minimal gain compared to that interest rate. Hence I'm choosing to go for prepayment until half of my principal is paid (which I plan to do in the next 3 years). Post that, even the 10.2 interest would be less than the principal deduction of my monthly emi, at which point I can use my excess income for long term goals. That's my chain of thought. Also seeing my debt go down faster helps me sleep better.
Increase in the intrest rate will lead to increase in time period for the repayment of loan.. and further those calculation are not considered in option2..
One more perspective - If you invest the amount for 10yrs you will have corpus that in extreme emergency can be used as well, which you don't have if you would have used for prepayment of home loan and you will be forced to take gold/personal loan etc. And if that extreme emergency dosen't happen then you can use your corpus to prepay the loan in one go (like 20yrs loan could be prepayed after 15yrs), considering 12% return and LTCG you will still have money to spare after prepaying the loan.
Loan emi are on reducing balance, while investment would be on compounding balance. Thus, is always better to both knock off the loan and invest an amount- the proportion would largely depend on how you plan them.
Mam aap jab bolna start karte he to usme hi itni ful energy dikhai deti h ke wo sher raftar kiyu nahi pakdega.....thanks k upar wale ne hamari life cheng karne k liye aap ko banaya
Whether the TAX benefit is calculated only for 1 year ? i.e. 2 lakhs on interest, i assume tax of 2 lakh savings should be taken in account for the entire tenure.... let me know if am i missing something here
More confusing. 10% Of Yearly EMI have to prepay after 5-7 year's of your housing loan. Afterwards we can invest in dynamic bond's instead of nifty ETF.
In case of home loan also consider the tax benefit you get on interest payment. So if two people have taken the loan and availing 4Lc of tax exemption. This could save upto 1.2Lc per annum (30% tax bracket)
I am in mid 20s and your videos really cleared my options towards my future investments. Thank you for effort for delivering this quality content to all peoples, Can't get this quality of advice from any other place.
Madam, Could you please help me to understand Rs. 13600 * 180 months became 80 lakhs and 14% of returns in investment are too high where we not getting even 12% returns. So i like to get more information
What if market behaves sideways for next 10 years and index funds won’t give much returns. Why don’t u add another option to counter this to check regularly if one is making more profit in reality and adjust whether to use the funds for loan principal repayment or still keep investing. That will make this video fool proof ❤
If Equity and mutual funds yields better returns than loan closure, why do banks into loan business. They can directly invest in them. Subject to market risk😂
Have you considered lumpsum payments in between ? Also I think it’s about discipline When you have to pay off loan you do that by emi and extra payments in between but if I prepay let’s say 5 lakhs every 6 months extra that knocks off loan principal amount Also when you have prepaid loan you have house appreciation too for confirming total gain … I think still not convinced prepaying is bad options
This is the best video on youtube. Only missing thing madam is age factor pl consider that and let us know age 30, 40,45,50. Also gome loan give 89c benefit which u missed.
Hi Rachana, I love your all videos, not only English but Marathi also. You explained very well and in detail the calculations. I would like to learn about the other scenario. what if we repay lump sum amount as home loan part payment per year? also if made a part payment in first 5 years instead of investing it in equity or MF. what would be result? please guide.
1. FD returns post taxes will be close to 4% 2. If NBFC is charging high interest then loan transfer or negotiating for lower interest rate are also some options
Madam your calculation is right but IN OPTION 2 do not we need to subtract total interest amount paid at the end of 20 yrs of home loan from returns from mutual fund to get final profit.. kindly answer..
Hello mam, I have a query out of curiosity, Option 1: 19.67 Lakhs profit in 5 years Option 2: 41.81 Lakhs profit in 15 years Should we consider the no. of years (i.e duration) also to determine which profit is better? What if a person choose Option 1 and reinvest the profit 19.67L @ 14% in market for another 10 years, he/she may get a profit of 79.12 Lakhs. Now comparing profit of Options investing for 15 years, Option 1: 79.12 Lakhs Option 2: 41.81 Lakhs
What is money saver home loan. Can you please make a video on it. Little that i know about it is that it's kind of overdraft home loan. Should we go about such home loan or not.
There are 2-3 more pointers needs to add into this video like tax benefit is only as per the basic salary....you should have considered like case to case from low to higher salary structure
You have not considered the tax angle of the loan. In a home loan at 8% you get upto 2 lakhs interest waiver from your income tax slab, say a savings of 30%, which brings down the effective interest rate to 6%. So if one has any instrument giving 8% after tax, it is still worth it. An index fund could give an average of 10-11% after tax and may be a good option
What about the floating loan interest rates if it changes like this we may end up 12-13% for home loan alone. In that case it is better to make prepayment as and when possible is a viable
Now as Rates have increased, banks have increased tenure. What will you suggest: To keep increased tenure as it is or to increase EMI to keep tenure as it was at the time of taking loan?
Please add tax on returns … You can’t guarantee 14% it can be 10 % also.. conditions apply … I think better to close the loan half and remaining invest in Realestate
About the prepayment penalty short description with link
economictimes.indiatimes.com/wealth/personal-finance-news/rbi-restricts-banks-from-charging-prepayment-penalty-on-home-loans/articleshow/12711108.cms
According to the RBI rule, banks are not allowed to charge you prepayment penalties on home loans.
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Being a chartered accountant, in my opinion, it's always better to knock off your loan first. It's very fancy to say that you can get 15% return from index and all but it doesn't work in that way. There are no return in straight line and you may face 2 to 3 years without having return while on the other hand you are paying hight interest in initial years. Every decision should not be taken solely based on calculations only. It's good to have a good sleep if your leverage is controlled. It's my opinion only, you may or may not agree.
I agree.. knock off the loan 😅
Spot on
YOU ARE RIGHT AND EVERY BODY DO NOT KNOW ABOUT INDEX
15% is also a pre-tax return, post tax returns would be lower especially in the 30% bracket. That woule be the right apples to apples comparision.
very true. the returns are substantial after atleast 5 years of investing in etf. until then its always a tilt between marginal gain and loss . repaying loan also increases the chances of taking another loan for another asset while etf investing won't get you a loan.
I had preferred to close home loan and ignore all this maths. I have definitely peace of mind. :)
@whatsap9593 Bro, get lost... :D
Worst worst 😂
Good
Same here.
People won't understand peace of mind until they get rid of the loan
Nice decision
Mistake 1: You missed taxes on the 47 lakhs. Even if it is invested for longer duration, LTCG has to be calculated and reduced from the 47 lakhs.
Mistake 2: when dividend payout and taxes on dividend is not even considered.( I don't know, whether you are considering 14% returns including dividend)
Mistake 3: current home loan interest rate in indian bank is 8.8% (Already RBI increased interest rate thrice without publicity)
Mistake 4: ETF & MF returns are subject to market risk, so you used only best returns rate for the calculation. You must project 3rd option with worst returns on ETF & MF.
my way to handle this is don't buy property until you have 40% cash with you. repay the loan within 5 years or atleast a large chunk of principal. don't invest on stocks sip etc. always invest on land like sites in outskirts of city, farm land n earn tax free income from farm land
I have 90% but I will only pay 50% as DP and Invest the remaining in MFs for the loan term.
Making money is not the same as keeping it there is a reason why investments aren't well taught in schools, the examples you gave are well stationed, the market crisis gave me my first millions, people shy away from hard times, I embrace them.. well at least my advisor does lol.,
@Billie Heeter Ury Not at all, having monitor edge my portfolio performance which has made a jaw dropping $473k from just the past two quarters alone, I have learned why experienced traders make enormous returns from the seemingly unknown market. I must say it's the boldest decision I've taken since recently
@Raul Romero
The adviser I'm in touch with is ' Gary Craig Raymond ' He works with Merrill, Pierce, Smith incorporated and interviewed on CNBC Television. You can use something else, for me his strategy works hence my result. He provides entry and exit point for the securities I focus on
The problem for lot of people is to find the right investment carriers that will give the 10-15% returns. Hence in my case also I chose to put all excess in home loan prepayment.
I'm 58 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, we are finding it impossible to replace it. We can get by, but cant seem to get ahead. My condolences to anyone retiring in this crisis, 40years nonstop just for a crooked system to take all you worked for
I think it's especially difficult for retirees and near retirees, I know to focus on the long term but the anxiety when you're supposed to be retiring in 3-5 years is exhausting.
I feel your pain mate, as a fellow retiree I’d suggest you look into getting loan from "World Quest Finance, I am keep buying stocks every time they go down 2% - 5% making my average lower and lower each time.. I just spend $1000 today on one of the stocks that I own and my average now is $1.39 and current price of stock is $1.33 … Now, I just wait and if it goes more down I’ll buy more
@@yarboroughbrad3082 While saving for a retirement is an important topic, it’s at least as important as what comes next: Your plan of action once you enter retirement. No matter how well you save during the accumulation phase, it’s critical to plan how you convert those assets to income.
@@ishaandevaj5587 Every individual needs funds to grow their business. For you to be a successful entrepreneur, you need to get extra money to boost your business. Getting a loan will allow you to make an extra move to expand your business. thanks for sharing
I realized something wicked was on the way 5 years ago , but I never imagined it would be so catastrophic I worked in a big hospital for 28 years , the BOD stripped our hospital to bare-bones and cut my hours drastically. Fk this, I felt the longer I stayed in HawAii or anywhere in the US , I was digging a deeper hole. my cobra payment was $600 a month. Luckily I was 62 and could retire early and then I moved overseas. Aloha
Relying on possibility of equity returns can be fatal. As returns from equity is probable profit but loan interest is certain liability. Moreover, we should not assume that income will increase continuously and the expenses will not. This is just my perspective to repay as much principle as possible in the initial 5-7 years when the maximum interest amount is due to be paid. After this tenure, spare amount investment in equity would be a good proposition.
Investing may or may not help you to get return. But loan repayment will certainly help you reduce the loan amount
If the loan interest rate is above 10% simple go ahead and clear loan don't listen to anyone.. it's not about returns it's all about peace of mind
Repayment of loan for sure,nothing better than being debt free for a peaceful life Teacher Ji.
Thank you so much for sharing your expert views. The "peace of mind" factor is rarely considered by experts.
Hello Ma'am,
In option 2, following assumptions are made which may not be true over period of 15 years of time.
1. Assumption is investment in index fund
2. Rate of return on investment is 14% throughout 15 years.
Also following is not considered in calculations in option 1.
Persons investment after loan payout within 5_8 years also increases..that profit is missing in gain calculation in option 1
Acche stocks choose kiya hai... Wow ... Your Love towards stocks market make us go crazy, students love towards subject depends on the teachers love towards the subject
The challenge is cash flow.. Is there a guarantee that a good cash flow will continue for foreseeable future.. In that case, it's better to invest the money rather than paying debt.. But if there is risk to cash flow, priority should be given for loan payment.. Statistically last couple of centuries, most of the business busted due to debt which they were not able to serve during bad times..
Highly informative and well thought 😊
Loan on fixed asset is always better than investment in other option.... U have not taken into account appreciation of the asset (in this case House ). After 15 years value of the house will also increase ... Lets say after 15 years house valuation has increased to 1.5cr .... In india 200% increase in house valuation after 15years is very likely... In a good Neighbor.... So effectively taking a home loan or any kindy of property loan is a win win situation
Thanks for the insightful video! It shed light on the nitty-gritty of loan repayment vs. investment, including the often-overlooked factor of changes in home loan interest rates. Once again, Thank you, @CARachanaRanade Jee !
Actually in option 2, the difference is considerably(10%) more. Because over 15 year period through tax benefit on additional interest, he could have afforded to start an sip of 1500 per month for 15 years(2.7L, but yes tax benefits are also having the same compounding effect cannot be linear, but for simplicity). If he invest it in same index fund at 14% for 15 years. At the end of it, that 2.7L would have grown to 9L.
So basically with option 2, it is 41.8L + 6.3L = 48L.
Just want to mention - hope everyone is also considering the rent you save or gain from the purchase. The property valuation is also a point to consider, some properties may get a 2X valuation by 7 to 12 years from purchase.
In the first option the return will be further reduced because by the time the first 15 years pass the market would have reached a new high. Index stocks would be very costly to begin with.
I was looking for this type of video as it was difficult for me to actually analyze these many angles..
Really nice explanation in easiest way.
Now I can check my case by my own.😀
Thank you very much Mam!!
This sounds soo got damn foolish mam🥲🥲🥲🥲 don't give us false hopes looking at the past .. inflation has increased more than people's salary all the time🥲 if salry increased inflation has increased twice there is no way we would be able to effectively reduce years on loan🥲🥲🥲 plzz give us better option don't give us false hopes
CA Rachana has illustrated the comparison based on "absolute interest". Impact of LTCG/STCG on investment returns was not considered in the discussion.
An alternate viewpoint is to take time value of money into account i.e. look at XIRR of combined EMI & SIP installments + tax saving every year + LTCG/STCG at the end.
Put all the projected cashflows of EMI, SIP, Tax Saving, LTCG etc. into a spread sheet and calculate the estimated XIRR. Think of the whole scheme of things as a "single investment product" with incoming and outgoing cashflows. If XIRR is negative, it's unlikely the scheme will be beneficial.
Assume Home Loan interest rate of 10% & SIP return rate of 12% to keep some margin of error, in case you go wrong on estimating interest rates.
Very nice presentation Rachana ji … it’s useful also . I am joining as an investor for ur class . I am also a lawyer and expert in taxation and laws . Very much impressed abt your efforts 🎉🙏🏻
Directly calculating the 30% tax savings on interest paid is not the ideal option because there is a 2 lakh maximum exception and most interest paid in a single year exceeds 2 lakhs. We do not receive the entire interest payment exemption. 15:25
Correct.
you should have shown comparisons with 12% return too. 14% is way too high return which is practically rare.
I was going through the same confusion since last few days. But this video as answer my all queries. Thanks a ton CA Rachana Ranade. Keep the grt work going. All the best 👍
What is not being factored into all of these options and calculations is Risk - Life comes at you in a thousand ways...always better to become Debt free at the earliest possible timeframe , and is one of quickest way to build wealth afterward provided you make wise investment decisions.
Most beginners make the error of trading alone without the necessary knowledge to enable them to profit from the market. I used to be that way, but everything changed because of expert Logan. Well, I'm glad I started investing in Mr. Logan's fantastic platform since I have never looked back.
You're the reason why I'm a consistently profitable trader 🎉
Trading with Mr Logan has changed my life because he has recovered all of my trading losses.
@chandrakant Soni.. you better go and beg on streets rather fooling people
Dono hi options situation ke hisab se bahatarin hai
Thank you mam
1. You assumed tax benefit on entire amount but forgot that limit is 2 lakhs
2 14% roi on equity index really? Just because index had 12% roi for last 15 years there is no gurantee the growth rate would be even better. I would suggest 10%-12% max should be optismitic as you should he little conservative on these calculations. And yes 10% vs 12% vs 14% matters a lot in long run. Also the cheapest home loans are currenty above 8% and might be even more for people with not so great credit score so assuming 7.5% was a mistake in current scenario.
Please stop misguiding! After 15 years India would be matured market don't advise 14% CAGR!!!!
Thanks a lot for making this video. Now it is easy to take a decision for whether we should go with repayment of loans or investing. As my age is below 30 and I can be invested for a longer duration I will opt for Investing rather than paying loans beforehand.
Actually, being a CA, She should have also shown LTCG tax to be paid for 15 yrs investment and then shown the NET gain. she showed the tax saved with home loan interest though.
I was just looking for what to do with my home loan as the interest rates have hiked. And I saw your video got uploaded just that moment. My home loan is only aged 1 year. So I'm going to knock off as much of it as I can right now. Will reanalyze once 5 years are up or half of the principal amount is repayed, whichever comes first.
@jubin: why u came to this conclusion...option 2 is also better option. .trying to understand if u got any other idea or understanding
@@amolsg7 My loan is actually a mortgage loan at floating interest rate, which is at 10.2% interest as of now. Even a 12% return in mutual funds is just a minimal gain compared to that interest rate. Hence I'm choosing to go for prepayment until half of my principal is paid (which I plan to do in the next 3 years). Post that, even the 10.2 interest would be less than the principal deduction of my monthly emi, at which point I can use my excess income for long term goals. That's my chain of thought. Also seeing my debt go down faster helps me sleep better.
How to beat inflation with investment between life needs focous Goal just Howcan balance our Goal
Fundamental flaw is 14% interest.. it’s gamble rate .. try to see reducing by 1% nd then will see the game..
Increase in the intrest rate will lead to increase in time period for the repayment of loan.. and further those calculation are not considered in option2..
One more perspective - If you invest the amount for 10yrs you will have corpus that in extreme emergency can be used as well, which you don't have if you would have used for prepayment of home loan and you will be forced to take gold/personal loan etc. And if that extreme emergency dosen't happen then you can use your corpus to prepay the loan in one go (like 20yrs loan could be prepayed after 15yrs), considering 12% return and LTCG you will still have money to spare after prepaying the loan.
Loan emi are on reducing balance, while investment would be on compounding balance. Thus, is always better to both knock off the loan and invest an amount- the proportion would largely depend on how you plan them.
Mam aap jab bolna start karte he to usme hi itni ful energy dikhai deti h ke wo sher raftar kiyu nahi pakdega.....thanks k upar wale ne hamari life cheng karne k liye aap ko banaya
Whether the TAX benefit is calculated only for 1 year ? i.e. 2 lakhs on interest, i assume tax of 2 lakh savings should be taken in account for the entire tenure.... let me know if am i missing something here
The same doubt was jumping in my mind for quite some time now. Thankyou for beautifully clarifying it to me. 😇
Amazing Teacher and have understood how to analyse stocks fundamentally
Thank you 😊
More confusing. 10% Of Yearly EMI have to prepay after 5-7 year's of your housing loan. Afterwards we can invest in dynamic bond's instead of nifty ETF.
In case of home loan also consider the tax benefit you get on interest payment. So if two people have taken the loan and availing 4Lc of tax exemption. This could save upto 1.2Lc per annum (30% tax bracket)
Very well explained
I was just thinking about these topic.. Thanks for providing making this one..
I am in mid 20s and your videos really cleared my options towards my future investments. Thank you for effort for delivering this quality content to all peoples, Can't get this quality of advice from any other place.
I needed it at this point of time. Thanks for making this video. Bless you
Madam,
Could you please help me to understand Rs. 13600 * 180 months became 80 lakhs and
14% of returns in investment are too high where we not getting even 12% returns.
So i like to get more information
The last sentence is important.
What is your view on Lesha industries and Bhatia communications? Please suggest for investment point of view
What if market behaves sideways for next 10 years and index funds won’t give much returns.
Why don’t u add another option to counter this to check regularly if one is making more profit in reality and adjust whether to use the funds for loan principal repayment or still keep investing. That will make this video fool proof ❤
Good stuff!! Very logical
exactly hat i wanted.. searching last 6 months..thanku appreciate ur lear explanation
If Equity and mutual funds yields better returns than loan closure, why do banks into loan business. They can directly invest in them. Subject to market risk😂
Have you considered lumpsum payments in between ?
Also I think it’s about discipline
When you have to pay off loan you do that by emi and extra payments in between but if I prepay let’s say 5 lakhs every 6 months extra that knocks off loan principal amount
Also when you have prepaid loan you have house appreciation too for confirming total gain …
I think still not convinced prepaying is bad options
Very good analysis :) Thanks a ton Mam :)
This is the best video on youtube. Only missing thing madam is age factor pl consider that and let us know age 30, 40,45,50. Also gome loan give 89c benefit which u missed.
Superb analysis
Thank you 😊
IIFL gold loan vs SBI Gold loan... How to invest, where to invest... Else...
Please start your videos in hindi .. so that it’s easygoing for all categories of viewers
Hi Rachana, I love your all videos, not only English but Marathi also.
You explained very well and in detail the calculations.
I would like to learn about the
other scenario.
what if we repay lump sum amount as home loan part payment per year? also if made a part payment in first 5 years instead of investing it in equity or MF. what would be result? please guide.
Thank you so much mam
I am your big fan🙏
always option2. you'll get benefits of additional returns for that 5yrs too. dont forget considering taxation of any gains from investments
1. FD returns post taxes will be close to 4%
2. If NBFC is charging high interest then loan transfer or negotiating for lower interest rate are also some options
Very perfectly done. Thanks mam
Already done absolutely same calculation and not prepaying loan but investing that money in pure equity for 17 years.
Madam your calculation is right but IN OPTION 2 do not we need to subtract total interest amount paid at the end of 20 yrs of home loan from returns from mutual fund to get final profit.. kindly answer..
Excellent video madam..and it's always better to clear off credit card, personal loans
Hello mam,
I have a query out of curiosity,
Option 1: 19.67 Lakhs profit in 5 years
Option 2: 41.81 Lakhs profit in 15 years
Should we consider the no. of years (i.e duration) also to determine which profit is better?
What if a person choose Option 1 and reinvest the profit 19.67L @ 14% in market for another 10 years, he/she may get a profit of 79.12 Lakhs.
Now comparing profit of Options investing for 15 years,
Option 1: 79.12 Lakhs
Option 2: 41.81 Lakhs
In option1 the 5 years are coming after replaying complete loan. So for both the options the duration is conaidered same.
Thanks for valuable guidance.
What is money saver home loan. Can you please make a video on it. Little that i know about it is that it's kind of overdraft home loan. Should we go about such home loan or not.
मॅडम
तुमचे video's हे खूपच अभ्यासपूर्ण माहिती देत असतात.....
आपण आज ज्या विषय बाबत बोलत हा मराठी मध्ये लवकर द्या.
Please suggest mutual funds which give returns of around 14% per year.this will be very much useful.
I am doing option 2 & I am loving it 💰💰💰💰💰💰💰
Thanks for the clear explanation
To pay the additional 9 Lacs there's gonna be more interest paid on that too. The Option 2 would then decrease further.
Convincing thought .....nicely explained.....you mesmerize everyone thro finlogic....great madam keep it up. Post more such interesting videos
Thank you 😊
I am really impressed by your videos. I wish you become our future finance minister..
Home loan has tax exemption which also has to be considered
There are 2-3 more pointers needs to add into this video like tax benefit is only as per the basic salary....you should have considered like case to case from low to higher salary structure
Very useful and informative 👍 👌 👏 video .
Glad you liked it.
Your all analysis are good . I wish to take your consultancy for financial managment/ planning.
How to go through ?
Thanks
B K Shah
Ma’am I’ve taken home loan for 30yrs and when I visited bank they told I can’t reduce the tenure.. what should I do in this case?
Hi. The advice was good. I just want to know in option 2 how Corpus size and absolute returns calculated pls
You have not considered the tax angle of the loan. In a home loan at 8% you get upto 2 lakhs interest waiver from your income tax slab, say a savings of 30%, which brings down the effective interest rate to 6%. So if one has any instrument giving 8% after tax, it is still worth it. An index fund could give an average of 10-11% after tax and may be a good option
Can you please share the excel sheet for calculation
On investment, when we redeem, need to give 30% tax. Include that also.
👌 छान समजावून सांगितले
What about the floating loan interest rates if it changes like this we may end up 12-13% for home loan alone. In that case it is better to make prepayment as and when possible is a viable
Mam top 20 stock per video banao
Jo portfolio mai hone hi chahiye
Large,mid, small cap
Now as Rates have increased, banks have increased tenure. What will you suggest: To keep increased tenure as it is or to increase EMI to keep tenure as it was at the time of taking loan?
Is it good to sell the jewels and reduce the home loan burden ?
Also i understand that home cannot be faster liquidity so i prefer investment give faster liquidity
very helpful information 👌
Very well explained, need to make same vedio on Marathi channel in Marathi language for our people's, it is very beneficial marathi people
Shall try
In fd you can compound your money, then repaying home loan. Please check.
Please add tax on returns … You can’t guarantee 14% it can be 10 % also.. conditions apply … I think better to close the loan half and remaining invest in Realestate