Home Loan ROI
Is your home loan actually working for you?
A clear-eyed framework to evaluate the return on India's biggest household debt.
The effective interest rate is lower than the sticker
Section 24(b) lets you deduct up to ₹2L of interest per year. Section 80C covers ₹1.5L of principal. For a 30% slab borrower, a 9% sticker rate behaves like ~7% post-tax in the early years. Use the post-tax rate when comparing against investments.
Compare against your real risk-adjusted return
If your equity SIPs realistically return 11% pre-tax (≈9.5% post-LTCG), and your post-tax loan rate is 7%, the math favors investing the surplus. If you're parking surplus in FDs at 6.5%, prepaying wins.
The 'peace of mind' premium is real
Behavioral finance is finance. If a closed loan helps you sleep, take a 1–2% lower theoretical return as the price of that peace. Especially as you near 50.
Watch your LTV and lender behaviour
If your loan-to-value drops below 75%, ask your bank for a rate review. Most won't volunteer it. A 25–50 bps drop can save lakhs over remaining tenure.