All you need to know about SIP for home loan repayment Buying Guide

When your dream home is bought and you take a loan from banks or housing finance companies they generally charge a lot of interest. Customers pay the applicable EMIs for the loan they avail from the financial institution. 

Ever thought if there's a way to have interest fewer home loans?

Well, to your delight, now there is! The easiest and simplest way of investing in a home is through Systematic Investment Plan (S.I.Ps). 

Understanding S.I.P for property buying!

Systematic Investment Plan commonly known as S.I.P is a basic investment plan. In a S.I.P an investor has to deposit a small sum every month or every quarter and it is noticed that anything followed systematically can be beneficial in the long run, be it a regular check-up, life’s savings, as well as home loan repayment. S.I.P has rescued many home loan borrowers by helping them save on the interest slab. S.I.P is either amount based or quantity based.  If you choose a mutual fund scheme and invest in S.I.P, based on the plan that you have opted, the money is allocated in debt or equity. 

Home loan of Rs. 20 lakh @ 8.5% for 20 years

EMI = Rs 17356

Tenure = 20 years

Total payment = Rs 52,06,800

With S.I.P and Increased loan tenure

Home loan of Rs. 20 lakh @ 8.5% for 30 years

EMI = Rs 15378

Tenure = 30 years

Total Payment = Rs 55,36,080

Monthly S.I.P of differential EMI = Rs 1978

Rate of Returns = 15%

Period = 180 months

At the end of 16 years:

Corpus at the end of 16 years = Rs 15.79 lakh (15% returns from SIP)

Loan Balance after 16 years = Rs 15.07 lakh

Total home loan EMI payments at the end of 16 years = Rs 41,65,552

Total S.I.P instalments of Rs 1978 per month = Rs 3,79,776

Total Gross Payment EMI+SIP = Rs 45,45,328

Savings in 30 years (compared to 20 years) = Rs 9,90,752

Why S.I.P is better?

There are a number of reasons why it is better to invest in mutual funds via S.I.P, few of them are jotted down below:

1.) S.I.P gives you steady returns

2.) S.I.P generates long-term profits

3.) S.I.P helps save on high-interest rates

4.) S.I.P helps in creating wealth

 5.) One can also avail tax benefits using S.I.P depending upon the mutual funds

Advantages of investment through S.I.P:

1.) S.I.P Is Pocket-Friendly:

There is no pressure that you need to invest a huge amount in S.I.P, one can even start S.I.P with a minimum of INR 500 monthly. As S.I.P allows you to invest in small portion also, it is considered as pocket-friendly.

2.) Collection For Down-Payment:

In S.I.P one can plan at least two years in advance, invest money in chunks and accumulate a good amount in 18-24 months. This money can be used to make the down-payment to purchase the property. S.I.P plays an effective and beneficial role for new as well as for existing home loan borrowers.

3.) S.I.Ps Enable Rupee-Cost Averaging:

When you invest regularly over a period irrespective of the market conditions, more units are bought when the market price of shares is low and lesser units are bought when the price is high it is called rupee cost averaging. The stock markets in India are unpredictable, hence it is difficult to understand what is the best time to invest and what is not.

4.) Best For Financial Goal Planning:

Every person has a set of certain aims which they need to accomplish it could be purchasing a property, to give the best education to their children or collecting funds for marriage. All these aims/goals need a huge amount of investment which can be achieved easily with the help of S.I.P.

5.) Power of compounding:

The most well-suited way to grow your wealth is to invest regularly and start your investment as soon as possible. Under this plan, one’s money is compounded that means it gives you more return at the end. With the advantage of the power of compounding one can create wealth in long-term and can stay invested in the plan for a longer tenure. For example, a Z person’s 90% net worth came after he turned 50 years; that is the power of compounding, which means longer the term, higher the returns! When you invest in mutual funds through S.I.P's you gradually create an asset for yourself that will help you achieve your financial goals in life with the help of the power of compounding.

Systematic Investment Plan (S.I.P) provides you with a disciplined approach to investment and that too at a very nominal amount to start with. All you need to do is quantify the amount for whatever you are planning to buy, based on which you can plan your S.I.P amount.

Before investing, always use a stable S.I.P calculator to understand the rate of return on your investment. S.I.P calculator is a useful tool for you to decide the amount you should invest in the mutual funds, also this tool quickly calculate the returns for you.

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Also, you can look out for properties to invest right now!

Projects around Mumbai:

Olympeo Neo City

Puraniks City

Ashiyana Infinity

Jainam Garden

Projects in Mumbai and Suburbs:

Maximum Mumbai 

Piramal Revanta

Mayfair Codename Sara Powai

Codename Legacy

UK Iridium

Sethia Imperial Avenue