Last Updated on January 9, 2023 by Tabraiz
Who doesn’t want to own a home? It is a long-term endeavor built on the life-changing choice to take charge of one’s life. The expensive real estate market in India is a challenge for most buyers. Thus, obtaining a mortgage becomes the most practical option. However, these home loan ultimately entangle a buyer in an endless web of EMIs.
A property loan calculator can help you calculate SIPs to recoup the interest you pay on your mortgage.
What Is SIP?
The Systematic Investment Plan, or SIP, is a financial tool that periodically lets you invest in mutual funds in smaller amounts. The intervals between deposits or SIPs can occur every week, every month, or every year. Instead of paying a sizable amount all at once, SIPs let you spread out your investment amount.
When investing in a mutual fund scheme using SIPs, you purchase fund units in proportion to your investment. You can achieve several financial objectives with the aid of systematic investment plans, or SIPs.
Did you know, however, that SIPs can also assist you in recouping the interest you pay on your mortgage?
Millions of homeowners acquired their homes through home loans. The amount you pay the bank monthly to repay your loan is an EMI or equated monthly installment.
A principal component and an interest component make up the EMI amount. The amount you have borrowed is the principal. For instance, if you borrowed Rs.50 lakh, your principal sum is Rs.50 lakh.
The bank sets the interest rate on your loan, which is currently between 8 and 9%. The interest rate will be higher during the first few years of your loan repayment. It will consequently get smaller over time.
How can SIPs Assist You in Recouping this Loan Interest?
A simple and user-friendly home loan interest rate calculator makes it easy to determine that. You can learn how to recoup your home loan interest in four simple steps.
Step 1: Enter the loan amount, rate, and term, then press Submit.
Step 2: The calculator will project the amount of interest you will pay over the term. Select Recover Your Interest by clicking.
Step 3: The property loan calculator will display the total interest due and the amount you must invest through a SIP to repay the home loan interest. Then, select “Proceed.”
Step 4: To help you reach your goal, our calculator will suggest a variety of mutual funds. Select SIP or Buy to finish the transaction for any of the funds.
SIPs can assist you in recouping the interest paid on your mortgage. Selecting SIPs has been crucial for recovering the interest amount for more than 15 years. Your EMI payments can gradually recover the money lost in repayment with a little disciplined investment and set aside.
Prepaying an EMI loan when you are already carrying a sizable debt is one of the mistakes people frequently make. The slow and steady approach always succeeds, however. Before considering prepaying the loan, one must take into account several factors. They include whether you have access to an emergency fund, the interest rate (the higher the rate, the slower you should pay), potential additional tax benefits, and more.
The returns from SIP investments are another important consideration. You risk losing out on the returns that come with SIPs if you try to pay off debt early.
SIPs are inherently vulnerable to market risks, but if used for a more extended period, they can be a safe investment. The return could range from -50 to +50% for a one-year investment. The return rates, however, can vary from 2 to 17% if the investment period is longer than 15 years. So, the only way to guarantee safety is to make long-term investments.
SIP can assist you in setting a great long-term goal by distributing your funds among various market levels. You can easily calculate SIPs using a home loan interest rate calculator.
However, one should always make sure they have an emergency fund to cover at least one year’s worth of expenses before applying for a home loan or beginning a SIP.