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SIP will compensate by giving more return than spent on home loan, understand the complete math

Highlights

You can also build a fund more than the total loan amount by investing 25% of the EMI in SIP.
On a loan of Rs 50 lakh, you have to pay about this or more interest.
After the loan, you should start SIP in a better mutual fund.

New Delhi. In the festive season, you will get a good deal with many offers on buying a house. Apart from the company selling the property, banks can also offer you many attractive deals on their behalf. At present, loans are available from banks at an average rate of 8 percent. Even if you take a loan for 20 years at this interest rate, then you have to pay the same interest as the principal amount. That is, you pay double the amount of the house.

This is the reason why many people avoid buying a house or any property by taking a loan. But this mindset has changed among the youth and they have become more conscious about their finances. Nowadays, somehow, we try to equalize the interest amount with some other investment in the next 20 years so that till the loan is over, the expenditure on your house gets canceled from your investment. In this, SIP done in any mutual fund can help you a lot. Let’s see how.

Also read- Break on selling of foreign investors, only ₹ 1,586 crore withdrawn in October so far

Repay loan expenses with SIP
Suppose you have taken a home loan of Rs 50 lakh and in 20 years you pay Rs 1 crore along with interest to the bank. Now how to make up for it? SIP can be one answer to this. Let’s try to understand it with numbers. Taking a loan on Rs 50 lakh at an interest rate of 8% per annum. Here your monthly EMI is Rs 41822. If your loan is of 20 years, then the total interest paid is Rs 50.37 lakh. The cost of the house was Rs 50 lakh. You spent 1 crore 37 thousand rupees including interest. Now let’s talk about SIP. Suppose you started investing only 25% of the EMI i.e. Rs 10912. In this, you will get an estimated annual return of 12 percent. In 20 years, you will have a fund of Rs 1.1 crore ready.

What is SIP
Systematic Investment Planning. It means that you invest money in a mutual fund after 1 stipulated time (1 month, 3 months, 6 months). It can be a SIP of equity or debt mutual funds. In this, your money is managed by an experienced fund and you do not need to look for stocks throughout the day. The risk in this depends on how you have chosen the fund. Let us understand this with the example of Equity Mutual Fund. If you invest money in small cap mutual funds then you can expect high return on investment but the risk will also be high. At the same time, the risk will be less in large cap mutual funds but profits will also come down in the same proportion. Hence, you should go ahead with a good mix of small, medium and large cap stocks in your portfolio.

Tags: business news in hindi, Home loan EMI, Investment tips, Returns of mutual fund SIPs, SIP

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