Did you waste money by paying off your home loan early?
The internet is flooded with financial advice and concerns, and recently one such financial concern was shared on Reddit that actually changed the way people think about home loans. Read on to know more…
All about the post
There is a moment of relief when the bank hands you your original property documents stamped "No Dues Certificate" in bold ink. You took a ₹45 lakh liability in 2018. Paid it off eight years ahead of schedule. You thought your friends would be happy for you. Instead, they told you that you made a mistake. Friends, think about your life in terms of numbers and money. They do not understand that you are living in the world. To know who is right, we have to look at the difference between what the numbers say and how you feel. The numbers say that your friends are not entirely wrong. They think about the difference between the cost of your debt and what you could have earned if you had invested your money.
[Potential Mutual Fund Return (12-14%)].
[Home Loan Interest Rate (8-9%)] = Lost Profit
Home loan s are a way to borrow money. Between 2018 and 2026 the interest rates for home loans were between 6.5% and 9%. Moreover, one can also get tax benefits when one has a home loan. The Indian Income Tax Act says that you can deduct the interest you pay on your home loan from your taxes. If you pay off your loan early, you will not get this benefit. The stock market in India has done well over the last eight years. If you had invested your money in the stock market, you could have earned a lot more than the 8.5% interest you were paying on your loan.
The common opinion
While most people may think that by doing so you may have missed out on a chance to earn a lot of money by paying off your loan. However, there is another side to this story. Spreadsheets do not understand how people think and feel. They do not know about the risks of life.
Is it a good idea to pay off the loan
Paying off your loan early is a guaranteed way to save money. When you invest in a fund, you are not sure how much you will earn. When you pay off your loan you know exactly how much you are saving. When you have a loan you pay interest at the beginning. If you pay off your loan early you save a lot of money on interest. Paying off your loan early also helps you feel better. You do not have to worry about debt. You can sleep better at night. You can take risks and do not have to stress about money all the time.
So who is right?
Well, when it comes to money, what matters most is how you feel. Your friends want to make as much money as possible but you want to be happy and secure. You can now use the money you were paying on your loan to invest in funds. You are not behind; you are just building your wealth from a place. Enjoy your debt-free home. You worked hard for it.
All about the post
There is a moment of relief when the bank hands you your original property documents stamped "No Dues Certificate" in bold ink. You took a ₹45 lakh liability in 2018. Paid it off eight years ahead of schedule. You thought your friends would be happy for you. Instead, they told you that you made a mistake. Friends, think about your life in terms of numbers and money. They do not understand that you are living in the world. To know who is right, we have to look at the difference between what the numbers say and how you feel. The numbers say that your friends are not entirely wrong. They think about the difference between the cost of your debt and what you could have earned if you had invested your money.
[Potential Mutual Fund Return (12-14%)].
[Home Loan Interest Rate (8-9%)] = Lost Profit
Home loan s are a way to borrow money. Between 2018 and 2026 the interest rates for home loans were between 6.5% and 9%. Moreover, one can also get tax benefits when one has a home loan. The Indian Income Tax Act says that you can deduct the interest you pay on your home loan from your taxes. If you pay off your loan early, you will not get this benefit. The stock market in India has done well over the last eight years. If you had invested your money in the stock market, you could have earned a lot more than the 8.5% interest you were paying on your loan.
The common opinion
While most people may think that by doing so you may have missed out on a chance to earn a lot of money by paying off your loan. However, there is another side to this story. Spreadsheets do not understand how people think and feel. They do not know about the risks of life.
Is it a good idea to pay off the loan
Paying off your loan early is a guaranteed way to save money. When you invest in a fund, you are not sure how much you will earn. When you pay off your loan you know exactly how much you are saving. When you have a loan you pay interest at the beginning. If you pay off your loan early you save a lot of money on interest. Paying off your loan early also helps you feel better. You do not have to worry about debt. You can sleep better at night. You can take risks and do not have to stress about money all the time.
So who is right?
Well, when it comes to money, what matters most is how you feel. Your friends want to make as much money as possible but you want to be happy and secure. You can now use the money you were paying on your loan to invest in funds. You are not behind; you are just building your wealth from a place. Enjoy your debt-free home. You worked hard for it.
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