Should I repay my home loan using mutual fund, FD savings?

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I retired as a Public sector unit (PSU) employee in 2017. I have a housing loan with an outstanding of 17 lakh to be repaid by 2027.

My savings in mutual funds now stands at almost of 17 lakh. My bank fixed deposit account value comes to around 38 lakh. I have no other liabilities. However, I will have to plan for my daughter’s marriage which will be taking place in a year or so. 

I have two flats, one of which is in my name and has a market value of 25 lakh. The annual interest on my home loan comes to around 60,000. Please advise whether I should close my housing loan from these funds or continue paying EMIs for the next five years. 

—Name withheld on request

From the data you have provided, it seems that you have a very small component of interest that you are paying on your home loan currently. This is probably because most of the interest component of your home loan has already been paid in the earlier part of your loan tenor. 

Since most of the EMIs that you are currently paying is going towards principal repayment, it may be a good idea for you to retain this loan as your mutual funds and bank deposits are likely to deliver a higher return than your loan over a five-year period. 

I had opened an account in a private bank as a student around 25 years ago. I completely forgot about it and did not use it for a very long time. Incidentally, my present employer asked me for the same bank’s account number and I wish to reactivate it now. 

Apart from KYC documents, do I need to submit anything else? If yes, what would it be? Will there be any charges levied over and above the service charge? 

—Name withheld on request

Since your account has been inactive for more than 24 months, it will be treated as inoperative or dormant by the bank. You will have to complete the KYC (know your customer) documentation for the bank to reactivate your account. As per the Reserve Bank of India (RBI) guidelines, there should not be any charges for activation of an inoperative account. 

Vishal Dhawan is a certified financial planner and founder of Plan Ahead Wealth Advisors, a Sebi-registered investment advisory firm.

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