A home loan can solve for many of your financial needs. It’s no longer means to the boring illiquid asset called home. Rather, a home loan unlocks lot of value if used effectively. Managing liquidity is so much easier with it, park your money against it to earn significantly more than your savings account and FDs. Moreover, this is another effective way to save further taxes, much needed after the new tax regime.
Try this – check your 26 AS for last year and see how much interest you have earned from your savings account, fixed deposits and RDs. The tax paid on all of these can all be saved, even the capital gains tax on your debt funds and liquid funds, all in its entirety can be saved. The returns you see there are also sub-par, your money can definitely earn you more than that.
Let’s figure out how!
Most of the banks offer an overdraft facility along with the home loan, albeit at a slightly higher rate of interest of 0.25% they would mention, in many cases this can also be avoided by choosing the right bank. Consider this overdraft account as a parking account where you can park any excess funds you have, considering moving your debt funds, FDs and RDs. You may also park your variable pay or bonus you receive before deciding where to spend or invest it. The perk to do that is, whatever funds are parked in this overdraft, the bank considers it as prepayment of principal and will reduce that balance from the outstanding loan amount before charging you interest. Effectively, the balance you maintain in the OD account saves you equivalent of your home loan interest rate, the best part, it comes with zero tax implications. This makes it the best alternative to your emergency funds, i.e funds otherwise lying in savings account, FDs or debt funds.
Moreover, the balance in OD can be withdrawn anytime. Banks calculate interest on daily outstanding basis, so your balance is always considered as prepayment for the days you park it in the OD account. It’s also the place for you to park your prepayments, as you shall still be able to access it as against prepayment made to the loan account directly.
Decoding the best home loan for you is made easier now, book your free session with EMIsaver.com. Myself and Jagadeesh Mohan shall personally assist you to customise your home loan.
