How can you get back the interest paid by just 20% investment? Know the amazing formula

Buying a house is the dream of all of us, but often this dream is not fulfilled without a bank loan. However, there is one biggest concern when buying a house – heavy interest coming with EMI. Especially when the loan tenure is long, the amount of interest is more than the principal. But what if you get this interest back?

You read the right – you can get back the interest of your home loan, and that too without taking risks, just a smart financial planning.

What is this miraculous way?

All you have to do is apply 20% of your home loan EMI in a SIP (Systematic Investment Plan). SIP is a method of mutual funds in which you invest a certain amount every month. If you invest for a time equal to the duration of your loan, the return on maturity will be more than the interest you paid.

Let us understand it from an example:

Loan Details:

• Loan amount: ₹ 30 Lakh

• Duration: 20 years

• Interest Rate: 9.25%

• Monthly EMI: ₹ 27,476

• Total paid amount: ₹ 65,94,241

• Total interest: ₹ 35,94,241

Now if you invest 20% of this EMI i.e. ₹ 5,495 per month SIP and consider an average of 12% return (which is possible in long -term equity mutual funds), then:

• Total Investment: ₹ 13,18,800

• Maturity Value: ₹ 54,90,318

  
  

• Net Profit: ₹ 41,71,518

This means: You paid ₹ 35,94,241 to the bank and earned ₹ 41,71,518 from SIP. That is, additional benefit of interest of interest + ₹ 5,77,277.

Why is SIP smart choice?

• Low risk, more profit: Investing for a long time reduces the risk in mutual funds.

• Tax relief also: Tax benefits can be found on SIP investment, especially in ELSS Funds.

• Inflation Beating Returns: Better returns of banks than FD.

What to do? How to do?

1. Start SIP as soon as EMI is fixed
   The more you start, the more benefit.

2. Choose Equity Mutual Fund
   It gives more returns for long periods.

3. Keep SIP on to loan tenor
   Invest with discipline for 20 years.

4. Reinvest returns (reinvest)
   The magic of compounding will be seen only when you do not remove the returns.

What to do if EMI is more?

If your EMI is big and it seems difficult to give 20% SIP, then you can start it slowly. Example: