Prepay Home Loan vs. Invest in Mutual Funds

Yes. When you prepay an 8.25% home loan, you save interest at a guaranteed 8.25% per year. Unlike the stock market, this return has zero risk and is unaffected by market swings.

Compounding needs time to work. When you invest your extra cash early into index funds or mutual funds, your money compounds for the full 15 to 20 years. If you prepay your loan first, you only start investing after the loan is cleared, missing out on years of compounding.

Paying just one extra EMI each year (or stepping up your EMI by 5% as your salary grows) can cut 4 to 5 years off a 20-year home loan, saving lakhs in interest without straining your monthly budget.

If your loan interest rate rises to 9.5% or 10%, prepaying becomes much more attractive. The gap between guaranteed debt savings and stock market returns narrows, making debt reduction the safer, smarter choice.

Yes. Each year, gains above ₹1.25 lakh are taxed at 12.5%. If you file under the old regime, you can turn on the home-loan interest deduction. It is capped at ₹2 lakh of interest a year. The new regime does not allow that deduction, so the calculator leaves it off unless you switch it on.