Pay home loan via SIP: Buying a home is one of the biggest aspirations for many individuals. Additionally, these days, home loan rates are quite affordable, and you can pay back the loan without much difficulty.
But if you want to become debt free faster, you have the flexibility to increase the number of instalments. Meanwhile, you will need to pay a higher EMI amount, and that’s where SIP can help you. So, here we will briefly discuss how to pay home loan EMI through mutual fund SIP. Here’s how it works.
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SIP for home loan
So, to pay home loan via SIP, you need to start investing in Equity Systematic Investment Plan (SIP) as soon as possible. The longer the SIPs are held, the more evenly they will cover your EMIs.
However, you must maintain high-value SIPs for years. Furthermore, you need to ensure that your SIPs are constant and last for an appropriate amount of time.
How to repay home lone with SIP
Now, coming to paying home loan with mutual fund SIPs. Suppose, you apply for a housing loan for Rs. 50 lacs over a 20-year period at 9% interest per year. With this, you need to pay monthly instalments of Rs. 44,896.
Now, if you invest in SIPs, you can subtract these EMI payments from the profit that you generate from higher-yielding investments.
SIP requires you to invest a small amount on a regular basis in order to obtain bigger returns. Assume you invest in SIP with a monthly investment of Rs. 5500. With a 12% predicted rate of return, you earn Rs. 54,95,314 on an investment of only Rs. 13,20,000.
EMIs stay constant for the home loan’s 20-year term. However, SIPs, while starting small, can be increased each year based on affordability.
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Pay home loan via SIP
Before considering SIPs to recover home loan, here are certain factors you should note these following points:
- As per financial experts, one should invest in SIP mutual fund at least 5 years before applying for a home loan. Doing so, you will get enough time to create adequate returns.
- Secondly, always monitor your financial situation before you consider using SIPs to cover house loan EMIs. Do not completely rely only on SIPs for house loan EMIs.
- Ensure a consistent income source to cover EMIs and explore SIPs as an additional investing option. Calculate the SIP amount needed to cover the home loan EMI.
- Choose those mutual funds that align with your both risk tolerance and investment goals.
