Is EMI + SIP better than just EMI?

The Smarter Choice: Start SIPs with EMIs

Assume that you have taken a home loan of ₹32 lakh at the rate of 8.5% (assumed floating rate of interest over the tenure of the loan). The EMI payable for 20-year period would be ₹27,770 per month. However, if you extend the loan period to 30 years, the same EMI would reduce to ₹24,605 per month.

Assume you opt for the 30-year loan period, and start a monthly SIP of the differential amount, that being, ₹3,165 in an Equity Mutual Fund scheme of your choice.

Who is smarter at repaying a home loan of ₹32 lakh?

#Assumed Rate of Return: 12.64 % (p.a.) i.e. mean of 10-year rolling returns between 01/06/13 and 30/05/23 of Sensex as per AMFI guidelines

Isn’t this a smarter approach?

Effects of taxation have not been considered in the above illustration.

The above calculations are for illustrative and educational purposes only and hence the rate of interest and return on SIPs are assumed numbers for ease of understanding of the readers. These rates fluctuate as per market conditions. These are not indicative / assuring of any future returns.

Past performance may or may not be sustained in future and is not a guarantee of any future returns.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.