Prepay your home loan, or invest the money?

It depends on your loan rate after tax and the return you can expect after tax. Prepaying earns you exactly the interest you no longer pay, with no risk. Investing can earn more, but the return is not certain. If your expected return after tax is well above your loan rate after any tax benefit, investing tends to leave you better off; if not, prepaying usually wins.

Reducing the tenure usually saves more interest, because the same EMI pays the loan off faster. Reducing the EMI frees up cash each month, which helps if your budget is tight or if you invest the difference. The calculator lets you compare both.

Not for a house you live in. Under the new regime, which is the default, interest on a loan for a self-occupied house cannot be deducted. Under the old regime, interest of up to ₹2 lakh a year can be deducted for a self-occupied house, if the purchase or construction was completed within five years. Check the current rules under the Income-tax Act, 2025.

It is the yearly return your investments would need to earn, before tax, for investing to leave you exactly as well off as prepaying. If you are not confident of beating it over the life of your loan, prepaying is the safer choice.

No. Money paid into a loan is hard to get back. Keep six months of expenses in a liquid fund or savings first, and make sure you have term and health cover, before you prepay or invest a lump sum.