Home loan EMI vs Mutual Fund SIP Calculator: Rs 70 lakh home loan EMI for 20 years or SIP equal to EMI for 10 years; which can be easier route to buy home; know maths

Home loan EMI vs Mutual Fund SIP Calculator: Should you go for a home loan or for investment that can complete your journey of buying a home in half of the loan duration? The obvious choice seems to be the second.

But in reality, the situations of individuals are complex.

Why a person may go for a home loan?

Because it can be an urgent requirement; house rents are touching the sky; it is an important financial goal and many want to achieve it during their job years; there is no guarantee of their job and earnings. So, the sooner this goal is achieved, the better it is.

But with real estate getting costly, home buyers are compelled to take high-amount loans.

The aftereffect is that the EMI amounts are getting higher, and loan durations are getting longer.

As a result, borrowers are paying much higher interest than the principal amount.

One of the major impacts of a home loan is that the EMI leaves little room for saving and investing money.

In another situation, what if a person has a new job, can earn for another 35-40 years, can go for skill upgradation, and so, can easily earn more in the future?

They have sufficient time to buy a home.

In such a situation, should they first opt for investment and then buy a house in their 40s?

In that way, not only can they create a sizeable corpus, they can also buy a home with a heavy down payment or a full payment.

Again, it depends on an individual's situation.

In this write-up, we take you through 2 scenarios.

In the first scenario, we will take the example of a Rs 70 lakh loan for 20 years at a 9.5 per cent interest rate.

In the second scenario, we will take the example of a mutual SIP investment equal to the home loan's equated monthly instalment (EMI).

We will show which can be a faster route to arrange money to buy a home.  

Home loan calculation conditions

The home loan amount is Rs 70 lakh. The interest rate is 9.5 per cent. The duration is 20 years. 

What will be EMI and interest?

The estimated EMI on this loan will be Rs 65,249, the estimated interest will be Rs 86,59,804, and the estimated repayment amount will be Rs 1,56,59,804. 

Property Price 

If 15 per cent is the down payment and Rs 70 lakh is the home loan, the amount of property will be Rs 82,35,300.

Inflation-adjusted price of property 

At 6 per cent annual inflation, a Rs 82,35,300 property will cost Rs 1,39,13,366 after 10 years. It will be our target amount for the SIP investment.

What will be SIP investment?

The size of the monthly SIP will be the same as the EMI—Rs 65,249. We are expecting 12 per cent annualised returns on the SIP investment. The investment duration will be 10 years. 

What will be corpus in 10 years?

The invested amount in 10 years will be Rs 78,29,880, estimated capital gains will be Rs 67,88,238, and the expected amount will be Rs 1,46,18,118. It can cover the cost of house.

What if annualised rate of return is 10%?

If annualised growth on the SIP investment is 10 per cent, even then in 11 years, the expected corpus will be Rs 1,52,84,180, which, after paying tax, can cover the cost of buying the home. 

(Disclaimer: These are projections and not investment advice. Do your own due diligence or consult an expert for financial planning.)