I have an ongoing home loan at an interest rate of 8.9 per cent. Also, I have some investment in mutual funds. Should I liquidate my investment in mutual funds and prepay the loan?
If you are taking in account a long period, say 8 to 9 years, then retain your mutual fund investment by all means; provided that you are paying the EMIs from your regular income and you are not facing any difficulty in doing so. And, also given that you are not apprehensive about the regular cash flow and your job.
Home loan is the only loan which I think makes sense to take. All other loans are avoidable. This is the only loan which helps you to build an asset which also rises in value. And, if you are living in that house, nothing like it. You are also able to save on the rental outflow. So, in that sense if you have more than a 5-year timeframe, it would always make sense to retain your investment and not prepay the loan subject to being sure that you will have no cash flow issues in your income to support the EMIs of that home loan.