SIP advantage: Invest just 10% of your EMI to recover entire cost of home loan

In the present times, taking a home loan is becoming a necessity for employed people. However, the interest you pay on the home loan often becomes more than the loan amount. If you calculate the amount you pay on a home loan of Rs 25 to 30 lakh, you'll realise that the loan will become double for you.

If you are a smart investor, you can eliminate this loss. Systematic Investment Plan (SIP) in Mutual Funds can help you with this. As soon as the home loan EMI starts, if you start a SIP equal to 10 per cent of the monthly instalment amount, you can get the full home loan cost back.

Here's the calculation on Home Loan of Rs 30 lakh

• Total Home Loan Amount: Rs 30 lakh
• Tenure for EMI: 25 years
• Interest Rate: 6.75 per cent (SBI)
• EMI per month: Rs 20,727
• Total interest: Rs 32,18,204
• Total Payment: Rs 62,18,204

Here, on a loan of Rs 30 lakh, you have to repay about Rs 62 lakh in 25 years, which is more than double the principal amount. Now we'll calculate the SIP and its interest amount

• Monthly SIP: Rs 2000 (10 per cent of EMI)
• Tenure for SIP: 25 years
• Estimated Return: 15% p.a.
• Amount invested: Rs 6 lakh
• Total Value of SIP: Rs 65.7 lakh

Here, you give about Rs 62 lakh to the bank in 25 years on a 30 lakh loan. At the same time, during these 25 years, by investing only Rs 6 lakh in SIP, you can make a corpus of about Rs 66 lakhs. That is, your loss can be reduced to zero here.