Prepayment is advisable? - Indian Real Estate Forum

hiroshan · 10-04-10

I have just taken a home loan from HDFC for next 20 ears.
But thinking of getting rid of it by doing prepayments every year.

Is it advisable to do so?
Is it good in intial days to do more re-payments or should hold the money due to rupee-value depreciation over time.

If anybody has calculations over past experience; please share.

peter.aviano · 10-04-10

By my rough calculations using an amort chart, say I have a home loan of 30 lacs at current interest rates for the next 20 years. You pretty much are paying interest = principle.

So your property cost is 30 lacs loan + 30 lacs interest + down payment.

Now when twisted this to basically carry out a 1 lac prepayment every year. I found some interesting facts
- home loan tenure reduced to ~12 years instead of 20.
- interest saved was ~17lacs rupees effectively bringing down the total cost of ownership to
30 lacs loan + 13 lacs interest + down payment.

Persoanlly, I would go for prepayment as much as possible, and that too initially. That way, any additional cash on hand can be used for other investments.

Note: This is a very high level calculation. I have not even factored in for increase in rate of interest.

10-04-10	#1
hiroshan New Member Join Date: Jan 2010 Posts: 13 My Mood: Thanks: 0 Thanked 0 Times in 0 Posts Rep Power: 1	Prepayment is advisable? I have just taken a home loan from HDFC for next 20 ears. But thinking of getting rid of it by doing prepayments every year. Is it advisable to do so? Is it good in intial days to do more re-payments or should hold the money due to rupee-value depreciation over time. If anybody has calculations over past experience; please share. __________________ Roshan Rasane Pune

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10-04-10	#2
peter.aviano New Member Join Date: Feb 2010 Posts: 30 Thanks: 0 Thanked 0 Times in 0 Posts Rep Power: 1	By my rough calculations using an amort chart, say I have a home loan of 30 lacs at current interest rates for the next 20 years. You pretty much are paying interest = principle. So your property cost is 30 lacs loan + 30 lacs interest + down payment. Now when twisted this to basically carry out a 1 lac prepayment every year. I found some interesting facts - home loan tenure reduced to ~12 years instead of 20. - interest saved was ~17lacs rupees effectively bringing down the total cost of ownership to 30 lacs loan + 13 lacs interest + down payment. Persoanlly, I would go for prepayment as much as possible, and that too initially. That way, any additional cash on hand can be used for other investments. Note: This is a very high level calculation. I have not even factored in for increase in rate of interest.