I am 47 and spouse 46 and we don't have kids . We have applied for adoption(taking time) but considering age , confused about whether to adopt and if not how to life with childlessness

Ans: Yes, you can use the money received from cancelling the agreement of one flat to repay the loan for the flat where you are residing. This can be a financially prudent decision, especially if the loan carries a high-interest rate. Here’s a detailed analysis to help you decide:

Benefits of Using the Money to Repay Your Loan
Interest Savings

Paying off your home loan early can save significant interest.
The earlier you repay, the more you save on interest due to the reducing balance method.
Debt-Free Living

Being debt-free reduces financial stress.
You free up cash flow that can be allocated to other financial goals.
Guaranteed Returns

Loan repayment offers guaranteed returns equivalent to the interest rate on your loan.
This is often better than the post-tax returns from other investments.
Enhanced Creditworthiness

Paying off a loan improves your credit score.
This is beneficial if you plan to borrow in the future for any purpose.
Factors to Consider Before Repaying the Loan
Prepayment Penalty

Check if your lender imposes a penalty for early repayment.
Most lenders, however, do not charge penalties on floating-rate loans.
Emergency Fund

Ensure you have an adequate emergency fund before using the money to repay the loan.
Ideally, keep 6-12 months of expenses in a savings account or liquid funds.
Opportunity Cost

Compare the potential returns from investing the money against the savings from loan repayment.
If your loan interest rate is lower than potential investment returns, consider investing instead.
Tax Benefits

Home loan interest payments qualify for tax benefits under Section 24(b) of the Income Tax Act.
Principal repayments are eligible under Section 80C.
If you repay the loan, you forgo these benefits, so weigh the impact on your tax planning.
Alternative Approaches
Partial Repayment

Consider making a partial repayment instead of fully paying off the loan.
This reduces the principal while keeping some funds liquid for other opportunities.
Invest for Higher Returns

If your loan interest rate is low, explore investing in mutual funds or other instruments.
Over time, these investments could potentially offer better post-tax returns.
Settle High-Cost Loans First

If you have any other high-interest loans, prioritise repaying those.
Examples include personal loans or credit card debts.
Final Insights
Repaying your home loan with the money from the cancelled flat agreement is a sound decision if your goal is to reduce debt and save on interest. However, consider your overall financial situation, including tax benefits, liquidity needs, and potential investment opportunities. A balanced approach—partly repaying the loan and investing the remaining amount—could offer the best of both worlds. Consulting a Certified Financial Planner can help you tailor the decision to your specific goals and circumstances.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment