If you take a Rs 50 lakh home loan for 20 years at a 9.50 per cent annual interest rate, your estimated EMI over that period will be Rs 46,607. With this EMI, the interest accrued will amount to Rs 61,85,574 and the total repayment will be Rs 1,11,85,574. This means that the interest will be nearly Rs 12 lakh more than the principal amount. However, by increasing the EMI to Rs 49,992 per month, you can reduce the interest amount to Rs 49,48,436 and fully repay the loan in just 17 years.
Repaying Home Loan Through SIP Mutual Fund Investment: Many borrowers opt for long-term home loans such as 20 years or more. Due to the extended duration, they often end up paying a higher interest amount than the principal amount. For example, if you were to take a Rs 50 lakh home loan for 20 years at a 9.50 per cent annual interest rate, your estimated EMI over that period will be Rs 46,607. With this EMI, the interest accrued will be Rs 61,85,574 and the total repayment will be Rs 1,11,85,574, which is nearly Rs 12 lakh more than the principal amount. However, by increasing the EMI to Rs 49,992 a month, the interest amount can be reduced to Rs 49,48,436, and the loan can be fully repaid in just 17 years. Another effective method to accelerate loan repayment is to initiate a mutual fund SIP alongside the home loan EMI. In this scenario, the SIP amount can be one-third of the home loan EMI. Detailed calculations are provided in this article.
Please note: The calculations presented here are for informational purposes only. It is advisable to conduct your own thorough research or seek advice from a financial advisor before obtaining a home loan or commencing an SIP for the same.
Your SIP amount will be one-third of your home loan EMI, which is approximately Rs 15,535.
To repay the Rs 50 lakh home loan, the principal amount repaid in the first year will be Rs 35,676, with Rs 1,97,356 paid as interest. After 1 year, the outstanding balance will be Rs 49,64,323, and the percentage of the loan amount paid till date will be 0.71%. In 10 years, the principal amount paid in the 10th year will be Rs 2,14,632, and the interest paid will be Rs 3,44,644. The outstanding balance at that time will be Rs 35,09,907, accounting for 29.8% of the total amount paid till that year. Even after half the duration, the outstanding balance will still be Rs 35,09,907. Let’s explore how a SIP can assist in repaying that amount.
Considering a 13% return from SIP investment, making a monthly SIP of Rs 15,535 for 10 years will result in an investment of Rs 18,64,200. At 13% annualised growth, the potential long-term capital gains will be Rs 19,67,984, and the total corpus will be Rs 38,32,184.
