• HDFC
• 11 May 2018

HDFC, Tester

Systematic Investment Plans or SIPs can help you achieve a variety of financial goals. But did you know SIPs can also help you recover the interest you pay on your home loan?

Millions of home-owners have bought their properties by taking a home loan. Home loans come with the option to pay EMIs or equated monthly installments, the amount you pay the bank every month to repay your loan.

 

The EMI amount consists of an interest component and a principal component. The principal is the amount you have borrowed. For example, if you have taken a loan of Rs 50 lakh, then your principal amount is Rs 50 lakh. The interest on your loan is fixed by the bank and is currently in the region of 8-9%. In the initial years of your loan repayment, the interest amount will be higher. This will correspondingly reduce over time. Let’s understand this with an example.

 

Assume you have taken a Rs 1,00,000 loan at 9% interest for a tenure of 20 years. Your EMI will be around Rs 900. In the first year, you would pay an interest of around Rs 8924 and principal of Rs 1873. In your tenth year, you would be paying an interest of Rs 6600 and principal of Rs 4197. In the 20th year, you would have paid only Rs 508 as interest and Rs 10,288 as principal. Over 20 years, you would end up paying almost Rs 1,16,000 as interest, more than your initial loan amount.

How can SIPs help you recover this interest amount on your loan?

A simple way to figure that out is our intuitive and easy-to-use EMI calculator .

 

In four easy steps, you can find out how to recover your home loan interest

 

Step 1: Enter loan amount, interest rate and tenure and hit submit.

Step 2: The calculator will give you a projection of how much interest you will be paying over your term. Click on Recover Your Interest.

Step 3: The EMI calculator will show you the total interest amount and the amount you will have to invest via SIP to recover the home loan interest. Click on 'Proceed'.

Step 4: Our calculator will recommend a wide range of mutual funds that will help you meet your goal. Choose SIP or Buy on any of the funds to complete the process.