How can you use Sip to restore interest on a home loan?


A home loan is an easy way to buy your dream home and conveniently repay it in equal monthly installments (EMIs). Given the very high cost of real estate, especially in urban areas, many buyers have loan terms of between twenty and thirty years.

The interest burden on these multi-year home loans corresponds in part to the loan amount or even more than twice the repayment outflow. In addition to early repayment, are there options to reduce or offset this interest burden in the long term?

Experts say the answer to that is: Start a Systematic Investment Plan (SIP) in equity funds or index funds.
In cooperation with CNBC-TV18, Nitin Mathur, CEO of Tavaga Advisory Services, said that if borrowers start a SIP of 10 percent of the monthly installment amount, once the EMI on the home loan starts, the entire home loan cost will be refundable.

Mathur explains this with an example.

“On a home loan of Rs 30 lakh for 25 years (at 6.75 percent interest), a person would have to repay about Rs 62 lakh, which is more than double the principal. At the same time, by investing just Rs 6 lakh (10 percent of the monthly rate) in SIPs from mutual funds over 25 years, you can build up a corpus of around Rs 66 lakh (with an estimated return of 15 percent pa). ”Mathur called.

Echoing Mathur, Anil Pinapala, CEO and Founder of Vivifi India Finance, said it’s always a good idea to start a SIP when you have disposable income after all of your payment obligations.

“This would help save higher returns than fixed-term deposits and can be viewed as offsetting against the home loan interest. However, investing in mutual funds is subject to market risk and so it is advisable that investors evaluate the fund they intend to invest in based on their current and immediate future flat-rate cash needs, ”he cautioned.

For the uninitiated, SIP allows investors to park money in small amounts and at regular intervals. This shapes the habit of saving and investing regularly and thus builds financial discipline in the life of the investor. In addition, it enables an investor to invest the money at different levels of the market cycle and therefore in long-term wealth creation. During times of high markets, the monthly SIP would buy fewer units, and when the markets are low, the same monthly SIP amount would buy more units. This means you can get a solid return over time without paying very high prices for a unit.

Disclaimer: The views and investment tips voiced by the investment professionals on are their own and not those of the website or its management. advises users to consult certified experts before making any investment decisions.

(Edited by : Ajay Vaishnav)


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