Home Loan EMI+SIP Investment: How you recover Rs 87 lakh interest amount of Rs 70 lakh loan by making SIP worth 1/10th of EMI

Home Loan EMI+SIP: After some years into a home loan, one may start making an investment. It may generate a corpus that can cover the interest amount of a large loan with a monthly SIP investment of just 10 per cent of the home loan EMI.

Shaghil Bilali | Jan 28, 2025, 04:17 PM IST

Home Loan EMI+SIP: Repaying a home loan and making a systematic investment in a mutual fund are two different things. But getting a return from the investment can cover a substantial amount of the loan interest if one manages to invest an amount equal to even a fraction of the EMI. Know how a home loan and the SIP investment can work and how a monthly SIP investment equal to just 10 per cent of the EMI amount can cover the Rs 87 lakh interest amount of the Rs 70 lakh, 25-year loan. 
Photos: Unsplash/Pixabay/Pexels
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)

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How home loan pans out

How home loan pans out

In a home loan, the interest amount increases with the loan tenure. So ideally, one should go for a low-tenure loan. But the important thing is that when you go for a low duration, the equated monthly instalment (EMI) increases.

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Examples of home loan

Examples of home loan

In this example, see how EMI and the interest amount will change with the loan tenure. Take the example of a Rs 75 lakh, 25-year loan at a 9.5 per cent interest rate for 20 and 30 years. 

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Examples of home loan

Examples of home loan

The estimated EMI in 20 years will be Rs 69,910, the estimated interest will be Rs 92,78,361, and the estimated repayment amount will be Rs 1,67,78,361.
The estimated EMI in 30 years will be Rs 63,064, but the estimated interest will increase to Rs 1,52,03,064, and the estimated repayment to Rs 2,27,03,064. 

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How SIP investment works

How SIP investment works

SIP investment can grow faster with time. The results may not be significant in initial years, but as the duration increases, the corpus rises faster. See it with an example.

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From Rs 5,000 to Rs 5 cr corpus

From Rs 5,000 to Rs 5 cr corpus

Creating a Rs 5 crore corpus from a Rs 5,000 monthly SIP investment seems to be an uphill task. But let's see how one may achieve it with a 12 per cent annualised return.
In 20 years, investment will be Rs 12,00,000, estimated capital gains will be Rs 37,95,739.60, and the estimated amount will be Rs 49,95,739.60.

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From Rs 5,000 to Rs 5 cr corpus

From Rs 5,000 to Rs 5 cr corpus

In 30 years, the investment will be Rs 18,00,000, estimated capital gains will be Rs 1,58,49,568.87, and the estimated amount will be Rs 1,76,49,568.87.
In 39 years, the investment will be Rs 23,40,000, estimated capital gains will be Rs 5,03,28,385.02, and the estimated amount will be Rs 5,26,68,385.02.
So, here you can see that with the same investment, the estimated corpus is growing faster with time.

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Calculation for home loan

Calculation for home loan

Here, we are taking the example of a Rs 70 lakh home loan at a 9.5 per cent interest rate for 25-year tenure.

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What will be EMI?

What will be EMI?

The estimated EMI for this loan will be Rs 65,249.18, estimated interest will be Rs 86,59,803.96, and the estimated repayment will be Rs 1,56,59,803.96.

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What will be SIP calculation?

What will be SIP calculation?

The SIP investment will be 10 per cent of the EMI amount. Since the EMI is Rs 65,249.18, the monthly SIP amount will be Rs 6,525.

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SIP investment duration

SIP investment duration

We are assuming that the borrower will not make an SIP investment for the first 2 years of the loan. Once their income increases, they will start making it from the 3rd year. So, the total SIP investment duration will be 23 years.

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What will be SIP returns in 23 years?

What will be SIP returns in 23 years?

The investment in 23 years will be Rs 18,00,900, while estimated capital gains in that period will be Rs 78,10,798.88.

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What will be total amount?

What will be total amount?

The estimated amount generated from the SIP investment will be Rs 96,11,698.88, which will be quite higher than the estimated home loan interest.

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