Make your home loan "Interest free" - possible? Lets see..

Everyone wants to have a roof on their head, and owning a HOME is one of the biggest dream for most Indians, or probably for everyone in the world. Home loan is a costly affair, and comes with a long term liability as most people buy home with 10-15-20 year home loans. Buying a home with personal money is not a possibility for majority of population and home loan is the only way for people to realize this dream.

Home loan comes with a “long term” commitment and involves insane payout in the form of interest, which can be equal or bigger than principle in many cases.?This puts a huge strain on financials of most families.

But what if someone tells you that you can take a home loan and it can be interest free or you can even make money after paying interest on it.? Sounds unreal, right!!!.

With smart strategy, bit of planning, patience and consistency, this could be a reality. Lets see how..

Say, you take a 50L homeloan for 20 years at 7.5% interest pa. EMI would be 40,279/- ?and your total payout in 20 years would be 96,67,118/- ?of which total interest payout would whopping be 46,67,118/-. You paid ~47L as interest on a loan of 50L.?Unfortunately, this is how the system works and there is no way to avoid this interest payout. ?Now what?

Lets adopt a strategy where you invest amount equal to 10-15% of the EMI in SIP over the tenure of the loan, which might give average of 12-15% CAGR over the long term. By doing this, you can recover the interest (or even more) by SIP ing?in MF in parallel.

Start a monthly SIP of ? 5,000 (~10-12% of the EMI), your investments at a 12% average annual return will grow to a total of ? 50.50 lakhs in 20 years.

@15% return, it will grow to ? 76.78 lakhs in 20 years.

From this corpus, even if you deduct your invested amount, which is ? 9.6 lakhs, then also you will have?earned ? 67.18 lakhs?which is much more than the interest payout of ~47L.

Getting a return of 12-15% onver such a long period of time is very much feasible. Also, there is a high probability that once can increase EMI with time to grow the corpus even more. ??

Conclusion: If you have taken a home loan or planning to take one, ?you can apply this approach and recover almost entire interest (or even more) and?own a home with “No Net Interest” payout with little bit of discipline, patience and consistency.

#smartinvesting #homeloans #sip #longterm #compounding