How to recover home loan interest paid till end
How to recover interest paid fully before the home loan is completed. The repayment of Home loans has become an essential financial tool for individuals seeking to own a house, but the accompanying interest payments can often feel like a financial burden. Over the loan tenure, the total interest paid can amount to a significant sum, leading many to wonder how they can offset or recover this cost. One effective strategy is starting a Systematic Investment Plan (SIP).
Save yourself from high home loan interest rates
Let’s explore how SIPs can help you recover your home loan interest and why this approach can make your financial journey less burdensome.
Scan and start mutual funds sip or call 9886568000
*Subject to market returns
Understanding the Burden of Home Loan Interest
When you take a home loan, the principal amount and the interest are divided into monthly installments over the loan tenure. While the principal helps reduce your outstanding loan amount, the interest is the cost of borrowing money from the bank. Depending on the loan amount, tenure, and interest rate, the total interest paid can sometimes surpass the principal itself.
For instance, if you take a home loan of ₹50 lakh at an interest rate of 8.5% for 20 years, the total interest paid over the tenure will be approximately ₹51 lakh. This means you effectively pay more than double the loan amount over time. For many, this is a significant expense that impacts other financial goals.
Why Insuring the home loan applicant is a must
Insuring a home loan applicant with a term insurance plan is essential to safeguard their family’s financial security. In case of unforeseen circumstances, such as the borrower’s untimely demise, the term insurance coverage ensures that the outstanding home loan is paid off. This prevents the burden of repayment from falling on the family, allowing them to retain ownership of the house without financial stress. Additionally, it ensures the family can continue their current lifestyle without significant disruptions.
Call 9886568000 for a term insurance plan that can act as a financial shield, providing peace of mind and protecting loved ones from potential financial hardships.
Why Pay Interest and Suffer?
Paying interest is unavoidable for most borrowers, but there’s no reason to let it weigh you down. Instead of suffering through the years of repayments, you can adopt a proactive approach to offset the cost. By channeling your savings into investments like SIPs, you can build a corpus that not only covers the interest paid but also generates wealth in the long run.
What is a Systematic Investment Plan (SIP)?
A Systematic Investment Plan (SIP) is a disciplined investment strategy that allows you to invest small amounts regularly in mutual funds. SIPs enable you to benefit from the power of compounding and rupee-cost averaging, making it a great choice for long-term wealth creation.
How to Use an SIP to Recover Your Home Loan Interest
- Calculate Your Home Loan Interest Burden
Start by calculating the total interest you will pay over the tenure of your home loan. Use an online home loan EMI calculator to get an accurate figure. - Determine Your SIP Contribution
To recover the interest paid, decide on a monthly SIP amount that aligns with your financial capacity. Even a modest amount invested regularly can yield substantial returns over time. - Choose the Right Mutual Funds
Invest in mutual funds that align with your risk tolerance and financial goals. For example:
- Equity mutual funds are suitable for high-risk, high-return seekers with a long-term horizon.
- Balanced or hybrid funds are ideal for moderate-risk investors.
- Debt mutual funds work well for low-risk investors.
- Leverage the Power of Compounding
The earlier you start your SIP, the more you benefit from compounding. Over the years, your investment grows exponentially, helping you recover the interest paid on your home loan. - Align Investment Tenure with Loan Tenure
Sync the SIP duration with your home loan tenure. For instance, if your home loan tenure is 20 years, aim to continue your SIP for the same period to maximize returns.
Example of SIP Recovery Strategy
Let’s say you pay ₹76 lakh in total interest over a 25-year home loan. By starting a SIP of ₹10,000 per month in an equity mutual fund with an average annual return of 12%, you could build a corpus of over ₹3,00,00,000/-* in 30 years. This not only covers your interest cost but also leaves you with surplus wealth.
Advantages of this Approach
- Offset Financial Burden: The returns from SIPs can offset the interest paid, reducing the financial strain.
- Disciplined Savings: Regular SIP contributions instill a habit of disciplined savings and investment.
- Wealth Creation: Beyond recovering your interest, SIPs help in building wealth for future goals.
- Tax Benefits: Some mutual funds, like ELSS (Equity-Linked Savings Scheme), offer tax benefits under Section 80C.
How to recover home loan interest paid
Paying home loan interest doesn’t have to be a source of suffering. By strategically investing through SIPs, you can recover the interest paid and potentially create significant wealth over time. This approach not only lightens your financial burden but also empowers you to achieve other life goals.
The investor can recover the interest part by investing 8 to 15% of the home loan EMI amount every month in mutual funds through SIP for the same period of the housing loan. Call 9886568000 to start a mutual fund with an expected rate of return of 12 to 15% and not more than that. Mutual funds may give more returns but are subject to market conditions, so let us keep the expected rate from 12 to 15% only
Take charge of your financial future knowing how to recover home loan interest paid and starting an SIP today, transforming your home loan repayment into a stepping stone for wealth creation.
* Subject to market conditions