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Home Loan EMI vs SIP: Which option will help you save over Rs 14 lakh?

9 minutes read


Home loans are often high in amount. So, when you take a home loan, you pay a large amount in interest, which can be more than the principal amount. E.g., when you take a Rs 75 lakh home loan for 20 years at an 8.50 per cent annual interest rate, your equated monthly instalment (EMI) is Rs 65,087, and the interest amount you pay is Rs 81,20,818, which is over Rs six lakh more than the principal. There are many ways in which you can reduce your repayment amount. Some of the prominent ways are by increasing your EMI amount, paying one extra EMI every year, paying 10 per cent extra every year, or running a systematic investment plan (SIP) along with your home loan EMI and covering a large repayment amount through that.

In our previous article, we told you how you can save over Rs 58 lakh on a Rs 1 crore, 20-year home loan if you simultaneously run an SIP, which is 25 per cent of your EMI.

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In this write-up, we will tell you that, will you save more money if, instead of running an SIP that is 25% of your EMI, you increase the EMI amount in the same proportion?

It means that if you are paying Rs 80,000 in EMI and running a Rs 20,000 SIP, will you save more money if you do not opt for SIP and increase your EMI to Rs 100,000 a month. 

Before going through the calculations and knowing the result, we put some conditions for home loan, such as the EMI amount, its tenure, the interest rate, the SIP amount, and its annual return.

Breakdown of home loan conditions:

Scenario 1

When you run a SIP of 25%

1. Home Loan Details:
○ Loan Amount: Rs 1 Crore
○ Interest Rate: 8.50%
○ Tenure: 20 years (240 months)
○ Monthly EMI: Rs 86,782
○ Total repayment amount: Rs 2,08,27,758
2. SIP Strategy:
○ SIP Amount: 25% of EMI = Rs 21,500 per month
○ Investment Period: 20 years
○ Expected Return: 12% annually

As was shown in the previous story, by investing a 25 per cent equivalent amount of your EMI into a SIP, you were finishing a 240-month loan in 138 months, saving Rs 82.10 lakh on repayment, investing Rs 29,67,000 in SIP, and thus saving nearly Rs 59 lakh overall.

Scenario 2

In Scenario 2, you are paying Rs 21,500 extra in your EMI, which means, the total amount you will pay in a month will be Rs 108,282 (Rs 86,782+Rs 21,500). It is important to know that when you opt for an increased EMI, the extra amount is added to your principal and not your interest. Here’s how you will pay your Rs 1 crore home loan with an increased EMI amount.

 

Month Opening balance EMI Interest Principal paid Closing balance Additional EMI
1 1,00,00,000 86,782 70,833 15,949 99,84,051 21,500
2 99,62,551 86,782 70,568 16,214 99,46,337 21,500
3 99,24,837 86,782 70,301 16,481 99,08,355 21,500
4 98,86,855 86,782 70,032 16,750 98,70,105 21,500
5 98,48,605 86,782 69,761 17,021 98,31,584 21,500
6 98,10,084 86,782 69,488 17,294 97,92,789 21,500
7 97,71,289 86,782 69,213 17,569 97,53,720 21,500
8 97,32,220 86,782 68,937 17,846 97,14,375 21,500
9 96,92,875 86,782 68,658 18,124 96,74,750 21,500
10 96,53,250 86,782 68,377 18,405 96,34,845 21,500
11 96,13,345 86,782 68,095 18,688 95,94,657 21,500
12 95,73,157 86,782 67,810 18,972 95,54,185 21,500
13 95,32,685 86,782 67,523 19,259 95,13,426 21,500
14 94,91,926 86,782 67,234 19,548 94,72,378 21,500
15 94,50,878 86,782 66,944 19,839 94,31,039 21,500
16 94,09,539 86,782 66,651 20,131 93,89,408 21,500
17 93,67,908 86,782 66,356 20,426 93,47,481 21,500
18 93,25,981 86,782 66,059 20,723 93,05,258 21,500
19 92,83,758 86,782 65,760 21,022 92,62,736 21,500
20 92,41,236 86,782 65,459 21,324 92,19,912 21,500
21 91,98,412 86,782 65,155 21,627 91,76,785 21,500
22 91,55,285 86,782 64,850 21,932 91,33,353 21,500
23 91,11,853 86,782 64,542 22,240 90,89,613 21,500
24 90,68,113 86,782 64,232 22,550 90,45,563 21,500
25 90,24,063 86,782 63,920 22,862 90,01,201 21,500
26 89,79,701 86,782 63,606 23,176 89,56,525 21,500
27 89,35,025 86,782 63,290 23,493 89,11,532 21,500
28 88,90,032 86,782 62,971 23,811 88,66,221 21,500
29 88,44,721 86,782 62,650 24,132 88,20,589 21,500
30 87,99,089 86,782 62,327 24,455 87,74,633 21,500
31 87,53,133 86,782 62,001 24,781 87,28,353 21,500
32 87,06,853 86,782 61,674 25,109 86,81,744 21,500
33 86,60,244 86,782 61,343 25,439 86,34,805 21,500
34 86,13,305 86,782 61,011 25,771 85,87,533 21,500
35 85,66,033 86,782 60,676 26,106 85,39,927 21,500
36 85,18,427 86,782 60,339 26,443 84,91,984 21,500
37 84,70,484 86,782 59,999 26,783 84,43,701 21,500
38 84,22,201 86,782 59,657 27,125 83,95,076 21,500
39 83,73,576 86,782 59,313 27,469 83,46,106 21,500
40 83,24,606 86,782 58,966 27,816 82,96,790 21,500
41 82,75,290 86,782 58,617 28,166 82,47,124 21,500
42 82,25,624 86,782 58,265 28,517 81,97,107 21,500
43 81,75,607 86,782 57,911 28,872 81,46,735 21,500
44 81,25,235 86,782 57,554 29,229 80,96,006 21,500
45 80,74,506 86,782 57,194 29,588 80,44,918 21,500
46 80,23,418 86,782 56,833 29,950 79,93,468 21,500
47 79,71,968 86,782 56,468 30,314 79,41,654 21,500
48 79,20,154 86,782 56,101 30,681 78,89,473 21,500
49 78,67,973 86,782 55,731 31,051 78,36,922 21,500
50 78,15,422 86,782 55,359 31,423 77,83,999 21,500
51 77,62,499 86,782 54,984 31,798 77,30,701 21,500
52 77,09,201 86,782 54,607 32,175 76,77,026 21,500
53 76,55,526 86,782 54,227 32,556 76,22,970 21,500
54 76,01,470 86,782 53,844 32,939 75,68,531 21,500
55 75,47,031 86,782 53,458 33,324 75,13,707 21,500
56 74,92,207 86,782 53,070 33,713 74,58,495 21,500
57 74,36,995 86,782 52,679 34,104 74,02,891 21,500
58 73,81,391 86,782 52,285 34,497 73,46,894 21,500
59 73,25,394 86,782 51,888 34,894 72,90,499 21,500
60 72,68,999 86,782 51,489 35,294 72,33,706 21,500
61 72,12,206 86,782 51,086 35,696 71,76,510 21,500
62 71,55,010 86,782 50,681 36,101 71,18,909 21,500
63 70,97,409 86,782 50,273 36,509 70,60,900 21,500
64 70,39,400 86,782 49,862 36,920 70,02,480 21,500
65 69,80,980 86,782 49,449 37,334 69,43,646 21,500
66 69,22,146 86,782 49,032 37,750 68,84,396 21,500
67 68,62,896 86,782 48,612 38,170 68,24,726 21,500
68 68,03,226 86,782 48,190 38,593 67,64,633 21,500
69 67,43,133 86,782 47,764 39,018 67,04,115 21,500
70 66,82,615 86,782 47,335 39,447 66,43,167 21,500
71 66,21,667 86,782 46,903 39,879 65,81,789 21,500
72 65,60,289 86,782 46,469 40,314 65,19,975 21,500
73 64,98,475 86,782 46,031 40,751 64,57,723 21,500
74 64,36,223 86,782 45,590 41,192 63,95,031 21,500
75 63,73,531 86,782 45,146 41,636 63,31,895 21,500
76 63,10,395 86,782 44,699 42,084 62,68,311 21,500
77 62,46,811 86,782 44,248 42,534 62,04,277 21,500
78 61,82,777 86,782 43,795 42,988 61,39,789 21,500
79 61,18,289 86,782 43,338 43,444 60,74,845 21,500
80 60,53,345 86,782 42,878 43,904 60,09,440 21,500
81 59,87,940 86,782 42,415 44,368 59,43,573 21,500
82 59,22,073 86,782 41,948 44,834 58,77,238 21,500
83 58,55,738 86,782 41,478 45,304 58,10,434 21,500
84 57,88,934 86,782 41,005 45,777 57,43,157 21,500
85 57,21,657 86,782 40,528 46,254 56,75,403 21,500
86 56,53,903 86,782 40,048 46,734 56,07,169 21,500
87 55,85,669 86,782 39,565 47,217 55,38,452 21,500
88 55,16,952 86,782 39,078 47,704 54,69,248 21,500
89 54,47,748 86,782 38,588 48,194 53,99,554 21,500
90 53,78,054 86,782 38,095 48,688 53,29,366 21,500
91 53,07,866 86,782 37,597 49,185 52,58,681 21,500
92 52,37,181 86,782 37,097 49,686 51,87,495 21,500
93 51,65,995 86,782 36,592 50,190 51,15,806 21,500
94 50,94,306 86,782 36,085 50,698 50,43,608 21,500
95 50,22,108 86,782 35,573 51,209 49,70,899 21,500
96 49,49,399 86,782 35,058 51,724 48,97,675 21,500
97 48,76,175 86,782 34,540 52,243 48,23,932 21,500
98 48,02,432 86,782 34,017 52,765 47,49,667 21,500
99 47,28,167 86,782 33,491 53,291 46,74,876 21,500
100 46,53,376 86,782 32,961 53,821 45,99,555 21,500
101 45,78,055 86,782 32,428 54,354 45,23,700 21,500
102 45,02,200 86,782 31,891 54,892 44,47,309 21,500
103 44,25,809 86,782 31,349 55,433 43,70,376 21,500
104 43,48,876 86,782 30,805 55,978 42,92,898 21,500
105 42,71,398 86,782 30,256 56,527 42,14,871 21,500
106 41,93,371 86,782 29,703 57,079 41,36,292 21,500
107 41,14,792 86,782 29,146 57,636 40,57,156 21,500
108 40,35,656 86,782 28,586 58,196 39,77,460 21,500
109 39,55,960 86,782 28,021 58,761 38,97,199 21,500
110 38,75,699 86,782 27,453 59,329 38,16,369 21,500
111 37,94,869 86,782 26,880 59,902 37,34,967 21,500
112 37,13,467 86,782 26,304 60,479 36,52,989 21,500
113 36,31,489 86,782 25,723 61,059 35,70,430 21,500
114 35,48,930 86,782 25,138 61,644 34,87,285 21,500
115 34,65,785 86,782 24,549 62,233 34,03,552 21,500
116 33,82,052 86,782 23,956 62,826 33,19,226 21,500
117 32,97,726 86,782 23,359 63,423 32,34,303 21,500
118 32,12,803 86,782 22,757 64,025 31,48,778 21,500
119 31,27,278 86,782 22,152 64,631 30,62,647 21,500
120 30,41,147 86,782 21,541 65,241 29,75,906 21,500
121 29,54,406 86,782 20,927 65,855 28,88,551 21,500
122 28,67,051 86,782 20,308 66,474 28,00,577 21,500
123 27,79,077 86,782 19,685 67,097 27,11,980 21,500
124 26,90,480 86,782 19,058 67,725 26,22,755 21,500
125 26,01,255 86,782 18,426 68,357 25,32,898 21,500
126 25,11,398 86,782 17,789 68,993 24,42,405 21,500
127 24,20,905 86,782 17,148 69,634 23,51,271 21,500
128 23,29,771 86,782 16,503 70,280 22,59,491 21,500
129 22,37,991 86,782 15,852 70,930 21,67,061 21,500
130 21,45,561 86,782 15,198 71,585 20,73,977 21,500
131 20,52,477 86,782 14,538 72,244 19,80,233 21,500
132 19,58,733 86,782 13,874 72,908 18,85,825 21,500
133 18,64,325 86,782 13,206 73,577 17,90,748 21,500
134 17,69,248 86,782 12,532 74,250 16,94,998 21,500
135 16,73,498 86,782 11,854 74,928 15,98,569 21,500
136 15,77,069 86,782 11,171 75,611 15,01,458 21,500
137 14,79,958 86,782 10,483 76,299 14,03,659 21,500
138 13,82,159 86,782 9,790 76,992 13,05,167 21,500
139 12,83,667 86,782 9,093 77,690 12,05,977 21,500
140 11,84,477 86,782 8,390 78,392 11,06,085 21,500
141 10,84,585 86,782 7,682 79,100 10,05,485 21,500
142 9,83,985 86,782 6,970 79,812 9,04,172 21,500
143 8,82,672 86,782 6,252 80,530 8,02,142 21,500
144 7,80,642 86,782 5,530 81,253 6,99,390 21,500
145 6,77,890 86,782 4,802 81,981 5,95,909 21,500
146 5,74,409 86,782 4,069 82,714 4,91,695 21,500
147 4,70,195 86,782 3,331 83,452 3,86,744 21,500
148 3,65,244 86,782 2,587 84,195 2,81,048 21,500
149 2,59,548 86,782 1,838 84,944 1,74,605 21,500
150 1,53,105 86,782 1,084 85,698 67,407 21,500
151 45,907 86,782 325 86,457 -40,550 21,500

 Chart Courtesy: Finnovate

Here’s how much money you will save

Total EMIs you are paying= 151

Total amount you are paying in EMIs= Rs 108,282X151= Rs 1,63,50,582

Amount you would have paid in 20 years (240 months)= Rs 2,08,27,758

Amount you will save= Amount you would have paid in 240 years- amount you paid in 151 months

Rs 2,08,27,758- Rs 1,63,50,582= Rs 44,77,176

Thus, you see that running an SIP along with your EMI would have saved you= Rs 58,84,842-Rs 44,77,176= Rs 14,07,666

Apart from that, in Scenario 1, you will repay your home loan in 138 months compared to 151 months in Scenario 1.





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