Home Loan EMI vs SIP Calculator: Should you go for Rs 65 lakh, 25-year home loan or start SIP investment of same worth? Know maths of both
Home Loan EMI vs SIP Calculator: A home loan can be an important financial goal for many individuals. When they take a home loan, they often pay higher interest than the principal amount. But what if instead of taking a home loan, they invest the same amount in SIP?
Home Loan EMI vs SIP Calculator: Taking a home loan or investing through mutual fund SIP can be a choice of an individual. When someone takes a home loan to buy a home, they may want to avoid paying high rents, which are rising faster than inflation; they may prefer having a home that they can customise according to their needs, and they may want to buy it early in their life because of the uncertainty of their job. But two important points when someone takes a home loan early in their life: a large equated monthly instalment (EMI) may affect their capacity to invest, and they practically don't own a home till the loan is repaid. So, should they delay taking a home loan and opt for investment? It can also be their choice. Starting investing early in a professional career gives an edge to an investor. By their early 40s, they can generate a corpus that can help them achieve many of their financial goals. In this write-up, we are discussing two situations: the first is the amount one will repay in a Rs 65 lakh home loan; the second is that if they invest the same amount in a mutual fund SIP.
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Home loan calculation
We are taking Rs 65 lakh as the home loan amount. The interest rate will be 9.50 per cent, and the loan tenure will be 25 years.
What will be home loan EMI?
The estimated EMI for the loan will be Rs 56,790.
What will be interest and repayment?
The estimated interest the borrower will pay on this loan will be Rs 1,05, 37,205, while the estimated repayment will be Rs 1,70,37,085.
SIP investment conditions
For mutual SIP investment, the duration will be the same as the loan duration. The overall amount will be Rs 65 lakh.
SIP investment conditions
Since returns are not fixed, we will calculate corpus on the basis of annualised returns of 8 per cent, 10 per cent, and 12 per cent.
Monthly SIP investment
The monthly SIP investment will be Rs 21,666 (in 25 years or 300 months, it will be Rs 65 lakh.
Corpus from Rs 21,666 monthly SIP investment in 25 years (at 8% return)
If the corpus grows at 8 per cent, estimated capital gains will be Rs 1,42,42,504, and the estimated corpus will be Rs 2,07,42,304.
Corpus from Rs 21,666 monthly SIP investment in 25 years (at 10% return)
At 10 per cent annualised growth, estimated capital gains will be Rs 2,24,86,932, and the estimated corpus will be Rs 2,89,86,732.
Corpus from Rs 21,666 monthly SIP investment in 25 years (at 12% return)
At 12 per cent annualised return, estimated capital gains will be Rs 3,46,14,362, and the estimated corpus will be Rs 4,11,14,162.