Similar to the decision of home buying – there is no perfect answer to this question. It changes with the individual, his/her financial situation, time available, any other loans, amount of saving etc.

Repayment of home loan – EMI – can be a hassle and a headache for someone as it is probably one of the largest monthly expense for him. Also, this payment can eat a large portion of one’s income.  That’s why most of the time it is recommended to repay your home loan early. The advantages of repaying home loan early can be :

• -More savings
• -Money become free for other expenses or for future use.
• -Being ‘debt free’ brings peace of mind.

Home loan is popularly called as a good loan. It is because it helps to increase your net worth and also offers tax benefit. But if one decides to repay this good loan early, then there are few important points which he/she should check before making decision. These points are:

• Make sure to check other financial objectives
• Check other loan payments, especially credit cards
• Be careful not to jeopardize investments and assets

Following is the checklist to check before paying off home loan:

• When a person decides to repay home loan, he must first repay the loan that has the highest interest. For example, personal loan, credit card payment, car loan etc. All these loans are charged at high interest, so it is better to repay these loans before repaying the home loan.
• Make sure you have enough in your emergency fund. It’s an important point to understand as you surely do not want to be house rich and cash poor by paying off your home loan early. Debt free home not going to help you in emergency situation.
• You may have also planned for other financial goals for you and your family’s future. Therefore, before turning your all savings towards home loan repayment, make sure that this decision not impacting your other financial goals.
• Understand that after paying off your home loan in full, you will also lose the tax benefits associated with it. Therefore, be sure to plan for your taxes as well.
• Sometimes, the idea of ​​getting out of debt as soon as possible becomes so essential to us that we can make the wrong decision instead of using our money prudently. So, make sure you use your money appropriately. Consider all possible options before concluding that repaying your loan is the only way for you.
• Whether or not you should repay your home loan early depends on how much savings you have, how you plan to repay without disturbing your day to day expenses and investments.

Seriously consider all your options before taking a decision like Refinancing at low interest rate or by making additional/extra payments towards principal amount whenever you have lumpsum available which can help in decrease the loan tenure and interest amount too. Further, it will also help to maintain your investments and liquidity.

The decision whether you should pay off your home loan early ultimately depends on how much money you have as surplus, other factors which are suitable to you and what works best for your financial situation.

Note:- Above article based on one of my Quora Answer.