I love contradicting myself..but this is not contradicting the earlier post….
When a 38 year old says…’My wife is tired of working…and she is quitting her job. She is getting Rs. 32 lakhs as Provident fund, …etc. should I use this amount to pay down my (our) housing loan of Rs. 44 lakhs..my answer is NO. Capital NO.
Let us take this case. Mr. U is earning about Rs. 55 lakhs CTC and has about Rs. 3 crores in mutual funds, equities, investment real estate…etc. His wife is giving up her job from a position of good comfort – there is no need for her to earn, but he is earning well and will continue to earn well.
The long term rates on all his SIPs are in the region of 12-28% p.a. and his home loan is a flat rate of 8% per annum. A lot of his money is in the higher end of the 12-28% range – the 12% return is in Templeton India Pension Plan. His Hdfc top 200, Hdfc Equity, Prudence, Discovery, Dynamic…are all giving him screaming returns.
Such a person who has about one year’s take home salary as home loans can continue to pay the EMI..at least till the tax advantages in repaying a loan (and interest) is available. More, far more important than that the amount of loan is miniscule compared to his networth and his ability to earn. Very clearly if your portfolio is growing at a rate greater than the rate at which you are paying interest…why argue?
Also leverage with so much of discipline is all right – in fact the bank which gave him the loan – is chasing him with a bigger loan 🙂
So different strokes for different people…
repay all the loans NOW….for some overleveraged, under earning joker…
just hold on to all your loans – for somebody who has a very low leverage…
that is what personal finance is all about, correct?
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