Friday, 23 March 2018

Prepayment vs investment - My dilemma

Watching the sensex going down every day has put me in a dilemma. At the start of the year, I decided to prepay my home loan since the market was very high and frankly I couldn't understand why. So I decided to not invest and instead use that money to actively prepay my home loan. My calculations showed that if I do that I would be able to close it by this year and without any prepayment by 2022.

I made two part payments towards my home loan so far and my current loan end date is Dec 2020. Seeing the sensex going down, I am evaluating 3 options

1. Stop prepaying and run the loan to its course and close by Dec 2020. Resume investing in MF.
2. Invest 50% of my savings in MF and use the other 50% to prepay loan. I can see this is outright stupid and is more towards FMO.
3. Stick to my plan of prepaying as of now and decide later depending on how sensex goes.

I am leaning towards option #3 now though my brain says option#1.

My reasons for option #3

1. Want to get rid of my home loan and be debt free. This is more towards peace of mind and comfort feeling.
2. With Indian elections in 2019, I am thinking the sensex will keep going down till the elections. Also I do not see BJP forming the government next term and so it will result in political instability which in turn will impact the market. And if I start investing agressively from Jan 2019, I should still be able to ride some of the market downturn due to elections.

So as of now my plan of repaying home loan continues, and I will revisit my stand when sensex goes below 30k.

Till then, continue my dumb but emotionally comfortable travel of prepayment.

Give me also springs of water!

No comments:

Post a Comment