Home Loan+SIP Investment: How SIP worth 11% of EMI can recover Rs 1.29 cr interest of Rs 80 lakh, 25-year loan; understand it through calculations
Home Loan+SIP Calculator: Repaying a home and investing in a scheme are two different things. But while repaying the loan, if one runs a mutual fund SIP simultaneously, with a SIP worth just 11% of the EMI amount, they can recover the loan interest amount.
Home Loan+SIP Investment: In most home loans, the borrower pays a higher interest amount than the principal amount. The reason is that home loans are taken for a long duration. So, when a borrower repays the loan, they spend quite a large amount from their monthly income just on interest. The interest amount can be reduced by paying an additional equated monthly instalment (EMI) every year. Or, a borrower can opt for prepayments. But sometimes, in a tight budget, there is not much scope for either of them. Is there any way to recover loan interest? The possible way can be to make an investment along with repaying the loan. But if one doesn't have money to pay an additional EMI or prepayment, can they arrange money to invest? In the initial years of the loan, it may not be a possibility. But as time passes and income increases, even a small monthly amount can be invested. In this write-up, we will project how, with just a mutual fund SIP worth 11 per cent of the EMI amount, one can generate fund that can easily match the interest amount of a Rs 80 lakh, 25-year home loan.
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What will be home loan conditions?
We will take the example of a Rs 80 lakh loan for 25 years at a 9.5 per cent interest rate.
What will be EMI on Rs 80 lakh loan?
The estimated EMI on the Rs 80 lakh loan will be Rs 69,896.
What will be interest and repayment on Rs 80 lakh home loan?
The estimated interest on the loan will be 1,29,68,720, and the estimated repayment will be Rs 2,09,68,720.
What will be SIP amount?
The SIP amount will be 11% of the EMI. It will be Rs 7,700.
What will be expected annualised SIP returns?
We expect 12 per cent annualised SIP returns on the investment.
What will be SIP returns?
The SIP investment in 25 years will be Rs 23,10,000. The estimated long-term capital gains will be Rs 1,07,96,991, and the expected amount will be Rs 1,31,06,991.
What if one gets more than 12% returns?
If one gets even 12.50 per cent annualised returns on the SIP investment, they can match the interest amount with just 10% amount of the EMI.
Disclaimer
Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning.