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SIPs Can Help You to Pay Your Home Loan Interest
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min read
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Written by Abhishekh Singh
Abhishek holds wide knowledge and experience in banking domain. In his leasure time, he loves to read about latest financial trends.
FY 2017-18 is a year of change for real estate in India. Several positive initiatives like an implementation of RERA, increased incentive under Pradhan Mantri Awas Yojana, granting of nfrastructure status to affordable housing have increased the home buyers confidence in the market. The interest rate for home loans has become as low as 8.5%*. However, this is still very high as compared to the developed nations of the world.
In this blog, we will discuss a strategy by which you can pay your home loan interest without adding a financial burden on your income. We are talking about Systematic Investment Planning SIP. Depositing a small sum of money every month/quarter can provide you with a huge return. In this regard, we would say, ompound interest is the 8th wonders of the world
Talking about returns on investment, according to Bank Bazaar, SIP mutual funds generate around 12%-22% return in the last 5-10 years Source: Zee Business. As the amount is invested on a monthly basis, there is no impact of market volatility.
Let say you take a home loan of 10 lakh at the rate of 8.5% for a tenure of 20 years. The total repayment would be 20,82,776 Principal Amt. 10,000,00 & Interest Payable 10,82,776
SIP = 1000 Per month
Tenure = 20 years i.e. 240 months
The principal amount would stand Rs 2.4 lakh
Let assume as per the latest market trend, return on investment as 15%, so after 20 years, the return will be around 15.2 lakh. Even if we deduct the principal amount from this, we will get 12.8 lakh.
Return from SIP Interest on home loans
12.8 lakh - 10.8 lakh = 2 lakh
Whatever you will pay as an interest on your home loans for 20 years will be compensated by the return you will get from the maturity of the SIP funds after the same duration.
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Disclaimer: The information contained in this post is for general information purposes only. IIFL Home Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment, etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness, or of the results, etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability, and fitness for a particular purpose. Given the changing nature of laws, rules, and regulations, there may be delays, omissions, or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan product specifications and information that may be stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan.
