Buying a home is one of the biggest decisions of your life. When someone thinks about buying a home, their first thought is affordability. The amount of loan available, interest rates, and the down payment that one can make to buy a home are three major factors to consider. These days, home loan rates are not as high as a few years back; and the homeowner can pay back the loan without much difficulty. However, to settle the loan quickly, we often tend to increase the number of instalments. This helps you pay your loans faster but results in a higher EMI amount. Now, there is something you can do to avoid this. You can invest the additional sum in equity and use the returns to pay off your loan EMI.
The idea here is to start an Equity Systematic Investment Plan (SIP) as soon as feasible in your career. Even if you cannot handle a hefty EMI right away, establish a SIP as quickly as possible. The longer the SIPs are held, the smoother they will cover your EMIs. But, this does not necessarily imply that you must have high-value SIPs for years to achieve this. They must be consistent and maintained for a suitable time. Suppose a person takes out a house loan for Rs. 50 lacs for 20 years at a 9% interest rate per annum. This will result in an instalment amount of Rs. 44,896 per month. You can deduct these EMI amounts with the profits from higher-yielding assets. A SIP can assist you and entirely pay this amount. SIP requires you to invest a small amount regularly to receive higher returns. Suppose you invest in SIP with monthly investments of Rs. 5500. With an expected rate of return set to 12%, you earn Rs. 54,95,314 with only Rs. 13,20,000 invested.
As a result, it is a viable choice to invest your additional funds in equity through SIPs and easily pay off house loan EMIs.
0 people liked this article.