VR Logo

Should I continue with my home loan?

Dhirendra Kumar highlights the reasons to continue with your home loan

I have recently sold one of the two properties I own and the money received is sufficient to repay the loan taken for the second property. Should I pay it off or continue with the loan to avail the tax benefit?
- Abhishek

Generally, home loan is the only loan worth continuing for a variety of reasons. One is that it's a long-term loan and if it fits into your income framework and repaying the EMIs doesn't create distress, then it's worth continuing. Also, if there's a great predictability and you have rising income, then it becomes a very nominal part of your income outflow. The other is that, over a long term you can gain by investing in equity as the return would be higher than the concessional interest you pay on a home loan. So, it is better to continue with the loan and maybe use the surplus towards investing in equity. Lastly, the tax break one gets on the interest and the principal repayment of the home loan is an added advantage. So, with these three combined together, the home loan is worth carrying on. But there is one situation where you should actually repay the loan. If you're actually getting stressed out over the repayment of the loan with regard to your day-to-day expenses, then understandably, one should actually reduce the debt.