How Can SIP Help You Repay Your Home Loan Interest Amount?


When you avail a home loan, its timely repayment should be your primary responsibility. The repayment of a home loan consists of two components, i.e., principal repayment and interest pay-out. You can repay your home loan through EMIs. However, keep in mind that your home loan EMI can eat up a major portion of your monthly income, leaving little or no scope for any savings.

Nevertheless, with a bit of research, and by making the right investment, you can recover the interest paid on your home loan. The smart way to do this is through an SIP!

What is SIP and How Can it Help in Repaying Home Loan Interest Amount?

A Systematic Investment Plan or SIP is an investment vehicle offered by mutual funds. With the help of SIP, you can invest a fixedamount of money periodically in the selected mutual fund scheme. The frequency of investment is usually monthly.

SIP Help You Repay Your Home Loan Interest Amount

Here’s how SIP can help you repay your home loan interest amount:

Let’s consider you take a home loan of Rs30 lakhs for a tenure of 20 years. The home loan interest rate is 8.5% p.a. In this case, the total repayment would be Rs62,48,327 (Principal Amount: Rs 30,000,00 and Interest Payable:Rs 32,48,327)

Now, suppose you start an SIP of Rs 3000/month

Tenure = 20 years i.e. 240 months

The total amount invested would be Rs 7.2 lakhs

If you get a return on investment of 15%, so after 20 years, the return will be Rs 45,47,865. Even if we deduct the invested amount from this, we will get Rs38,27,875.

Return from SIP – Interest on home loans

Rs38,27,875 – Rs32,48327= Rs5,79,548

From the above-mentioned example, we can conclude that the amount you will pay as interest on your home loanwill be compensated by the return from the maturity of SIP funds after the same duration.

Benefits of SIP

Some of the other benefits of SIP are mentioned below:

  • You do not need a large amount to start investing in SIP mutual funds. SIP is easy on the budget, and you can start by investing as low as Rs 500 per month.
  • You can enjoy higher returns on investment, approximately 12 to 15% per annum.
  • Investing in SIP mutual funds will make youfinancially disciplined and inculcate saving habit.
  • Apart from recovering your home loan interest amount, you can also use SIP returns for making part-prepayment of your home loan or clearing other debts sooner, instead of continuing them for a longer time period.

To sum it up, if you plan to avail a home loan for buying a house, or if you are already servicing a home loan, it would be advisable to start an SIP to reduce the burden of home loan interest over the long term. With reputed financial institutions, you can easily start an SIP online from the comfort of your home. In case of any query, you can get in touch with your lender’s representative or consult a financial expert to make a well-informed decision.

Leave a Reply

Your email address will not be published.