Before prepaying your home loan –
* consider your cash needs for goals, emergencies, etc.
* compare return from investments versus cost of home loan
* repay higher cost loans first
* consider the stage of your home loan tenure
* consider prepayment charges, if any
TAX DEDUCTION FOR HOME LOAN
You are entitled to claim tax exemption of up to Rs.1.50 lakh per financial year on repayment of principal amount of housing loan. You can also get tax exemption on interest paid on housing loans (full interest amount is allowed as exemption in case of let-out property, whereas in case of self-occupied property, the exemption is up to Rs.2 lakh). Moreover, with the government’s focus on ‘housing for all’, the tax incentives on housing loans may increase over time. On full prepayment of your housing loan, you will no longer enjoy these tax benefits; in case of part prepayments, you will get lower tax benefits.