In today’s times, when inflation is constantly rising, simply repaying the loan isn’t enough. Concurrent investments are also essential for financial security in the years to come. In this situation, starting a mutual fund SIP along with your home loan is a great financial strategy, allowing you to build wealth while repaying your debt.
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A simple example of a home loan and EMI
Suppose a person takes a home loan of ₹30 lakh for a 20-year term at an interest rate of 9 percent. In this case, their monthly EMI comes to approximately ₹26,992. Experts recommend investing at least 25 percent of the total EMI amount in a mutual fund SIP. In this example, a monthly SIP of approximately ₹6,750 is considered appropriate.
How much can a SIP fund be created in 20 years?
If this amount is invested consistently for 20 years and earns an average annual return of 12 percent, the total investment value reaches approximately ₹62.09 lakh. On the other hand, over 20 years of EMIs, you are paying approximately ₹64.78 lakh to the bank. This means that the fund created through SIPs is almost equal to your entire home loan expense.
Benefits of Compounding and Long-Term Impact
The biggest strength of mutual fund SIPs is compounding. The longer you continue investing, the greater the benefits. The initial investment may seem small, but over time, it accumulates into a substantial amount, making it easier to meet future financial needs.
A Better Way to Reduce Loan Pressure
Even during a long-term financial responsibility like a home loan, regular SIPs reduce financial pressure. This investment habit not only increases savings but also provides psychological confidence that a strong financial backup will be available in the future.
Effective in Meeting Future Goals
When your home loan is repaid after 20 years, the large fund created through SIPs can be used to meet your new financial goals. Whether it’s children’s education, a second home, a business plan, or retirement security, SIP funds prove to be extremely useful in every situation.
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Smart Step for Long-Term Financial Planning
Instead of focusing solely on paying EMIs, running a parallel SIP can ensure a more financially secure future. This is why financial experts recommend combining SIPs with home loans to maintain investment discipline and ensure financial stability in the future.