Home loan EMI+SIP: By paying 11% more than your EMI, you can recover entire Rs 97.3 lakh interest liability in 25 years; here's how
Home loan EMI+SIP Investment: For a Rs 60 lakh, 30-year home loan for 25 years, the estimated EMI will be Rs 52,422, estimated interest will be Rs 97,26,540, and the repayment amount will be Rs 1,57,26,540.
Home loan EMI+SIP Investment: How does home loan work? You take a loan for a long duration and pay interest on it. The interest on a high-amount, long-duration loan can be higher than the principal. How does an investment work? You invest one-time, monthly, or in phases and get growth on it. Home loans and investments are different in nature. But if a borrower repays a home loan and runs a parallel investment, they can easily recover the interest amount they are paying on the loan.
In this write-up, we will tell you how you can recover the home loan interest amount of over Rs 97 lakh on a Rs 60 lakh, 30-year loan by starting an investment with just 11% of your EMI amount.
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What is the home loan amount?
We are taking the example of a Rs 60 lakh home loan for 25 years at an annual interest rate of 9.5 per cent.
What will be home loan EMI?
The estimated home loan EMI in such a case will be Rs 52,422.
What will be interest and repayment?
The estimated interest amount in 25 years will be Rs 97,26,540, and the repayment amount will be Rs 1,57,26,540.
Where will investment be made?
It can be anything where 12 per cent annualised returns are possible. It can be an SIP in a mutual fund(s) scheme.
What will be monthly investment?
The monthly SIP investment in the mutual fund will be Rs 5,766, which is 11 per cent of the EMI amount.
Duration of investment
SIP investment will run parallels to home loan repayment, so the duration of investment will also be 25 years.
Total investment in 25 years
The total investment in 25 years will be Rs 17,29,800.
Corpus amount in 25 years
The estimated corpus created in 25 years will be Rs 98,14,923, where Rs 80,85,123 will be long term capital gains.
What if one continues investment after repaying loan
If one gets 12 per cent annualised for one more year, the estimated corpus created in this way will be 1,10,66,325, while the additional investment during that duration will be Rs 69,192. It means that even after paying 12.50 long term capital gains tax on investment, one will cover the amount of home loan interest.
Disclaimer
Our calculations are projections. Actual calculations may vary. Do your own due diligence or consult an advisor for financial planning.