We all dream of buying our own home. But with the high real estate prices, we are left with no other option than to take home loans to make this dream come true. And with these huge loans come astronomical interest costs. But there is a way to make these home loans interest free. Yes! It’s possible! And we’ll tell you exactly.
While most banks and housing finance companies highlight the EMIs you need to pay and make you believe that you can afford your dream house, the reality is home loans cost an insane amount of money. In most cases, the total interest you will end up paying will be much higher than the loan amount. For example, for a home loan amount of ₹ 40lakhs at 9% interest for a tenure of 20 years, EMI would be ₹ 35,989. So, if you keep paying this EMI for 20 years, you end up paying ₹ 86.37 lakhs in total. This ₹46.37 lakhs extra is the interest you pay. Take a moment to think about it – you pay more than what you borrowed as interest plus the actual amount. However, there is no way out to get rid of interest because that’s the way the loan system works. So, does it mean you should not buy a house till the time you don’t have the entire amount? If you can, nothing like it. But for most of us, this might not be a viable option.
The Solution – Recover the interest amount you will pay by investing in mutual funds starting a SIP of 0.16% of your home loan amount in an equity mutual scheme, you can recover the interest amount. Let’s continue with the example we mentioned above. If you start a monthly SIP of ₹ 6400 (0.16%of the loan amount), your investments at a 12% average annual return will grow to a total of ₹ 63.31 lakhs in 20 years. From this corpus, even if you deduct your invested amount, which is ₹15.36 lakhs, then also you will have ₹47.95 lakhs in your hands, which is more than enough to cover the interest you will pay.
This calculation holds true no matter what your loan amount is If you have taken or are planning to take a loan to buy your dream home, you will have to pay interest costs. But with a small SIP, you can recover the entire amount with ease. However, this will become a reality only if you keep investing that amount and demonstrate patience. And that brings us to the end of the video. Want to invest to make your home loans interest free.