Mutual fund investments query

This query is : Resolved

deepak (Querist)
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30 May 2024 Query:
One of my client has taken a mortgage loan against his property of Rs 1 crore for purchasing other property so my question is as now after taking loan he has decided to not invest in property and he wants to invest in mutual fund.

So my query is can he do so

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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30 May 2024 Check any restriction imposed by bank for the utilization of the loan for any specific purpose; otherwise no issue.

Jaspal Singh

Jaspal Singh (Expert)
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30 May 2024 loan against property can be used for any purpose , home loans have restriction for specific home purchase.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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15 August 2025 If the mortgage loan agreement does not impose any restriction on the usage of funds—unlike a home loan—then investing the proceeds into mutual funds is permissible from the lender’s and regulatory standpoint.
However, consider the following before proceeding:
Review Loan Agreement: Confirm that the bank has not mandated end-use restrictions.
Tax Implications: Unlike home loan interest, you will not get any deduction under Sections like 24(b) or 80C if the loan is used for mutual fund investments.
Risk Management: Employing borrowed funds for market-linked investments introduces leverage and liquidity risk. Ensure that you can service interest and principal payments even during market downturns.

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