Aftershocks. If you wish to exercise the switching option, there is a one-time cash outflow. Getting your loan refinanced from a bank is also a good option. The best thing about this option is that the tenure and the interest burden reduces considerably, albeit at a cost higher than that of switching. The best option seems part prepayment, wherein there is no cost involved, except the opportunity cost that your prepayments could have earned if invested in high-yielding options like stocks where returns aren't certain.
Raising prepayment funds
Remember, the amount that you are going to prepay your loan with is not coming back to you. Developments such as windfall profits from the stockmarket, maturing of old investments, build-up of capital over the years due to increase in salary, or a bonus might prompt you to go for prepayment, in part or whole.
Diversion from other tax saving instruments can be explored. Close all dormant savings account and use those funds to prepay. Use unutilised funds lying in our brokerage accounts to prepay. Ring up your friends to ask them about the funds that they owe to you and seek zero-interest loans from parents or close relatives.
Conclusion
Before you choose your option, you should examine the alternatives and the costs associated. A period of indebtedness of 10, 15 or 20 years, clubbed with the uncertainties of job and life, create an uneasy situation. From a purely psychological perspective, it may be better to pay off one's debts.
This strategy would appeal all the more to you if you want to live in a debt-free world and own a home. You will get to own the home earlier if you channelise your surplus funds towards prepayment.
Interest rates are cyclical in nature and considering that home loans are long-term commitments, there will be some periods du-ring the tenure when rates move up and some periods when they will move down.
Prepaying allows you to own the home sooner. With luck, by the time the rates fall the next time around, you may be in a position to consider buying your second home.
Also read: World's 10 top management gurus
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