Home Loan+SIP: How you can repay Rs 1 cr, 20-year loan in just 11.6 years and save Rs 59 lakh on repayment

Written By: Shaghil Bilali New DelhiZeeBiz WebDesk Updated on: June 28, 2024, 01.16 AM IST

Home loans are most likely large amount. Specially in Tier-1 cities; they can exceed the Rs 1 crore mark. When you take a large home loan for a long period of time, you end up paying more in interest than the principal amount. E.g., if you take a Rs 1 crore loan at an 8.50 per cent annual interest rate for 20 years, your interest in those years will be over Rs 1.083 crore, or Rs 8.23 lakh more than your principal amount.

Purchasing a home is a dream for many, but it is a costly affair, and one depends on loans from banks or housing financing companies to buy a home. Home loans are most likely large amount. Specially in Tier-1 cities; they can exceed the Rs 1 crore mark. When you take a large home loan for a long period of time, you end up paying more in interest than the principal amount. E.g., if you take a Rs 1 crore loan at an 8.50 per cent annual interest rate for 20 years, your interest in those years will be over Rs 1.083 crore, or Rs 8.23 lakh more than your principal amount. But what if you make an investment simultaneously with your home loan repayment, and that investment helps you repay your home loan years earlier than the original loan duration, and also saves you a great deal of money?

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Not only may such an option may lighten your burden of debt, but it can also ease your psychological pressure.

But how is it possible?

It can be done by making a monthly SIP worth one-fourths of your equated monthly installment (EMI) of your home.

Even if you get a 12 per cent annual return on your SIP investments, you can accumulate an amount that can help you repay your 20-year loan in just 11 years and six months.

Not only that, you can also save Rs 52.50 by repaying your home loan in that duration.

Here's how you can plan it out, as per Finnovate.

Here’s a breakdown of the figures:
1. Home Loan Details:

◦ Loan Amount: Rs 1 crore
◦ Interest Rate: 8.50%
◦ Tenure: 20 years (240 months)
◦ Monthly EMI: Rs 86,000

2. SIP Strategy:

◦ SIP Amount: 25% of EMI = Rs 21,500 per month
◦ Investment Period: 20 years
◦ Expected Return: 12% annually

With this strategy, let’s analyse how the SIP investment aids in accelerating the loan repayment:

Month	Opening balance	EMI	Interest	Principal paid	Closing balance	SIP
1	1,00,00,000	86,782	70,833	15,949	99,84,051	21,500
2	99,84,051	86,782	70,720	16,062	99,67,989	43,215
3	99,67,989	86,782	70,607	16,176	99,51,813	65,147
4	99,51,813	86,782	70,492	16,290	99,35,523	87,299
5	99,35,523	86,782	70,377	16,406	99,19,117	1,09,672
6	99,19,117	86,782	70,260	16,522	99,02,595	1,32,268
7	99,02,595	86,782	70,143	16,639	98,85,956	1,55,091
8	98,85,956	86,782	70,026	16,757	98,69,200	1,78,142
9	98,69,200	86,782	69,907	16,875	98,52,324	2,01,423
10	98,52,324	86,782	69,787	16,995	98,35,329	2,24,938
11	98,35,329	86,782	69,667	17,115	98,18,214	2,48,687
12	98,18,214	86,782	69,546	17,237	98,00,977	2,72,674
13	98,00,977	86,782	69,424	17,359	97,83,618	2,96,901
14	97,83,618	86,782	69,301	17,482	97,66,137	3,21,370
15	97,66,137	86,782	69,177	17,606	97,48,531	3,46,083
16	97,48,531	86,782	69,052	17,730	97,30,801	3,71,044
17	97,30,801	86,782	68,927	17,856	97,12,945	3,96,255
18	97,12,945	86,782	68,800	17,982	96,94,963	4,21,717
19	96,94,963	86,782	68,673	18,110	96,76,853	4,47,434
20	96,76,853	86,782	68,544	18,238	96,58,615	4,73,409
21	96,58,615	86,782	68,415	18,367	96,40,248	4,99,643
22	96,40,248	86,782	68,285	18,497	96,21,751	5,26,139
23	96,21,751	86,782	68,154	18,628	96,03,123	5,52,900
24	96,03,123	86,782	68,022	18,760	95,84,362	5,79,929
25	95,84,362	86,782	67,889	18,893	95,65,469	6,07,229
26	95,65,469	86,782	67,755	19,027	95,46,442	6,34,801
27	95,46,442	86,782	67,621	19,162	95,27,281	6,62,649
28	95,27,281	86,782	67,485	19,297	95,07,983	6,90,776
29	95,07,983	86,782	67,348	19,434	94,88,549	7,19,183
30	94,88,549	86,782	67,211	19,572	94,68,977	7,47,875
31	94,68,977	86,782	67,072	19,710	94,49,267	7,76,854
32	94,49,267	86,782	66,932	19,850	94,29,417	8,06,122
33	94,29,417	86,782	66,792	19,991	94,09,426	8,35,684
34	94,09,426	86,782	66,650	20,132	93,89,294	8,65,541
35	93,89,294	86,782	66,507	20,275	93,69,019	8,95,696
36	93,69,019	86,782	66,364	20,418	93,48,601	9,26,153
37	93,48,601	86,782	66,219	20,563	93,28,038	9,56,914
38	93,28,038	86,782	66,074	20,709	93,07,329	9,87,984
39	93,07,329	86,782	65,927	20,855	92,86,474	10,19,363
40	92,86,474	86,782	65,779	21,003	92,65,471	10,51,057
41	92,65,471	86,782	65,630	21,152	92,44,319	10,83,068
42	92,44,319	86,782	65,481	21,302	92,23,017	11,15,398
43	92,23,017	86,782	65,330	21,453	92,01,564	11,48,052
44	92,01,564	86,782	65,178	21,605	91,79,960	11,81,033
45	91,79,960	86,782	65,025	21,758	91,58,202	12,14,343
46	91,58,202	86,782	64,871	21,912	91,36,290	12,47,987
47	91,36,290	86,782	64,715	22,067	91,14,223	12,81,966
48	91,14,223	86,782	64,559	22,223	90,92,000	13,16,286
49	90,92,000	86,782	64,402	22,381	90,69,620	13,50,949
50	90,69,620	86,782	64,243	22,539	90,47,080	13,85,958
51	90,47,080	86,782	64,083	22,699	90,24,381	14,21,318
52	90,24,381	86,782	63,923	22,860	90,01,522	14,57,031
53	90,01,522	86,782	63,761	23,022	89,78,500	14,93,101
54	89,78,500	86,782	63,598	23,185	89,55,316	15,29,533
55	89,55,316	86,782	63,433	23,349	89,31,967	15,66,328
56	89,31,967	86,782	63,268	23,514	89,08,453	16,03,491
57	89,08,453	86,782	63,102	23,681	88,84,772	16,41,026
58	88,84,772	86,782	62,934	23,849	88,60,923	16,78,936
59	88,60,923	86,782	62,765	24,017	88,36,906	17,17,226
60	88,36,906	86,782	62,595	24,188	88,12,718	17,55,898
61	88,12,718	86,782	62,423	24,359	87,88,359	17,94,957
62	87,88,359	86,782	62,251	24,531	87,63,828	18,34,406
63	87,63,828	86,782	62,077	24,705	87,39,123	18,74,251
64	87,39,123	86,782	61,902	24,880	87,14,243	19,14,493
65	87,14,243	86,782	61,726	25,056	86,89,186	19,55,138
66	86,89,186	86,782	61,548	25,234	86,63,952	19,96,189
67	86,63,952	86,782	61,370	25,413	86,38,540	20,37,651
68	86,38,540	86,782	61,190	25,593	86,12,947	20,79,528
69	86,12,947	86,782	61,008	25,774	85,87,173	21,21,823
70	85,87,173	86,782	60,826	25,957	85,61,216	21,64,541
71	85,61,216	86,782	60,642	26,140	85,35,076	22,07,687
72	85,35,076	86,782	60,457	26,326	85,08,750	22,51,264
73	85,08,750	86,782	60,270	26,512	84,82,238	22,95,276
74	84,82,238	86,782	60,083	26,700	84,55,539	23,39,729
75	84,55,539	86,782	59,893	26,889	84,28,650	23,84,626
76	84,28,650	86,782	59,703	27,079	84,01,570	24,29,972
77	84,01,570	86,782	59,511	27,271	83,74,299	24,75,772
78	83,74,299	86,782	59,318	27,464	83,46,835	25,22,030
79	83,46,835	86,782	59,123	27,659	83,19,176	25,68,750
80	83,19,176	86,782	58,927	27,855	82,91,321	26,15,938
81	82,91,321	86,782	58,730	28,052	82,63,269	26,63,597
82	82,63,269	86,782	58,531	28,251	82,35,018	27,11,733
83	82,35,018	86,782	58,331	28,451	82,06,567	27,60,350
84	82,06,567	86,782	58,130	28,652	81,77,915	28,09,454
85	81,77,915	86,782	57,927	28,855	81,49,059	28,59,048
86	81,49,059	86,782	57,723	29,060	81,19,999	29,09,139
87	81,19,999	86,782	57,517	29,266	80,90,734	29,59,730
88	80,90,734	86,782	57,309	29,473	80,61,261	30,10,828
89	80,61,261	86,782	57,101	29,682	80,31,579	30,62,436
90	80,31,579	86,782	56,890	29,892	80,01,687	31,14,560
91	80,01,687	86,782	56,679	30,104	79,71,583	31,67,206
92	79,71,583	86,782	56,465	30,317	79,41,266	32,20,378
93	79,41,266	86,782	56,251	30,532	79,10,735	32,74,082
94	79,10,735	86,782	56,034	30,748	78,79,987	33,28,323
95	78,79,987	86,782	55,817	30,966	78,49,021	33,83,106
96	78,49,021	86,782	55,597	31,185	78,17,836	34,38,437
97	78,17,836	86,782	55,376	31,406	77,86,430	34,94,321
98	77,86,430	86,782	55,154	31,628	77,54,802	35,50,764
99	77,54,802	86,782	54,930	31,852	77,22,949	36,07,772
100	77,22,949	86,782	54,704	32,078	76,90,871	36,65,350
101	76,90,871	86,782	54,477	32,305	76,58,566	37,23,503
102	76,58,566	86,782	54,248	32,534	76,26,032	37,82,238
103	76,26,032	86,782	54,018	32,765	75,93,267	38,41,561
104	75,93,267	86,782	53,786	32,997	75,60,270	39,01,476
105	75,60,270	86,782	53,552	33,230	75,27,040	39,61,991
106	75,27,040	86,782	53,317	33,466	74,93,574	40,23,111
107	74,93,574	86,782	53,079	33,703	74,59,871	40,84,842
108	74,59,871	86,782	52,841	33,942	74,25,930	41,47,190
109	74,25,930	86,782	52,600	34,182	73,91,748	42,10,162
110	73,91,748	86,782	52,358	34,424	73,57,324	42,73,764
111	73,57,324	86,782	52,114	34,668	73,22,656	43,38,002
112	73,22,656	86,782	51,869	34,914	72,87,742	44,02,882
113	72,87,742	86,782	51,622	35,161	72,52,581	44,68,410
114	72,52,581	86,782	51,372	35,410	72,17,171	45,34,595
115	72,17,171	86,782	51,122	35,661	71,81,511	46,01,441
116	71,81,511	86,782	50,869	35,913	71,45,597	46,68,955
117	71,45,597	86,782	50,615	36,168	71,09,430	47,37,144
118	71,09,430	86,782	50,358	36,424	70,73,006	48,06,016
119	70,73,006	86,782	50,100	36,682	70,36,324	48,75,576
120	70,36,324	86,782	49,841	36,942	69,99,382	49,45,832
121	69,99,382	86,782	49,579	37,203	69,62,179	50,16,790
122	69,62,179	86,782	49,315	37,467	69,24,712	50,88,458
123	69,24,712	86,782	49,050	37,732	68,86,980	51,60,843
124	68,86,980	86,782	48,783	38,000	68,48,980	52,33,951
125	68,48,980	86,782	48,514	38,269	68,10,711	53,07,791
126	68,10,711	86,782	48,243	38,540	67,72,172	53,82,368
127	67,72,172	86,782	47,970	38,813	67,33,359	54,57,692
128	67,33,359	86,782	47,695	39,088	66,94,271	55,33,769
129	66,94,271	86,782	47,418	39,365	66,54,907	56,10,607
130	66,54,907	86,782	47,139	39,643	66,15,263	56,88,213
131	66,15,263	86,782	46,858	39,924	65,75,339	57,66,595
132	65,75,339	86,782	46,575	40,207	65,35,132	58,45,761
133	65,35,132	86,782	46,291	40,492	64,94,640	59,25,719
134	64,94,640	86,782	46,004	40,779	64,53,862	60,06,476
135	64,53,862	86,782	45,715	41,067	64,12,794	60,88,040
136	64,12,794	86,782	45,424	41,358	63,71,436	61,70,421
137	63,71,436	86,782	45,131	41,651	63,29,784	62,53,625
138	63,29,784	86,782	44,836	41,946	62,87,838	63,37,661

Chart Courtesy: Finnovate

Nehal Mota, Co-Founder & CEO, Finnovate, said: "Here's the magic: by diligently paying your EMI and simultaneously investing in SIP, you'll reach a point where your SIP returns can cover your remaining loan amount. In simpler terms, your investments will grow to a size where they can clear your loan balance, making you debt-free much earlier than the original loan tenure.
"In this scenario, a loan that would typically take 240 months (20 years) to close could potentially be paid off in just 138 months (a little over 11 years)!"

How will you save over Rs 59 lakh

◦ So, you see that after repaying your loan for 138 months and investing in SIPs for the same duration, you will have a surplus of Rs 49,823.

◦ SIP corpus (63,37,661)- Total balance Rs (62,87,838)= Rs 49,823

◦ On the other hand, in a 20-year loan, your repayment amount, including interest and principal, would have been Rs 2,08,27,758.

◦ But since you are repaying the loan in 11 years and six months (138 months, your total repayment amount will be = EMI amountX138= Rs 86,782X138= Rs 1,19,75,916

Investment in SIP= SIP amountX138= Rs 21,500X138= Rs 29,67,000

Total amount you paid in repayment and SIP= Rs 1,19,75,916+29,67,000= 1,49,42,916

Total amount you will save on home loan= Rs 2,08,27,758-Rs 1,49,42,916= Rs 58,84,842

So, on a Rs 1 crore home loan, you will save nearly Rs 58.85 lakh if you make an SIP of Rs 21,500 for 138 months.

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Home Loan+SIP: How you can repay Rs 1 cr, 20-year loan in just 11.6 years and save Rs 59 lakh on repayment

Here’s a breakdown of the figures: 1. Home Loan Details:

2. SIP Strategy:

How will you save over Rs 59 lakh

Here’s a breakdown of the figures:
1. Home Loan Details: