Home Loan : How to make your home loan interest free?
We all dream of buying our own house. But with high real estate prices, we have no choice but to take home a loan to make this dream come true.
And with these huge loans comes astronomical interest costs. But there is a way to make these home loans interest free.
While most banks and housing finance companies highlight the EMI you need to pay, and believe that you can buy your dream home, the reality is that home loans cost you a huge amount.
In most cases, the amount borrowed will be much higher than the total interest you pay.
For example- for a home loan amount of 40 lakhs at 9% interest for a tenure of 20 years, the EMI would be ₹ 35,989.
If you pay this EMI for 20 years, you pay 7 86.37 lakhs in total. This is the additional interest paid by this 46.37 lakhs.
Take some time to think about it – you pay more than you borrow as interest and the actual amount.
However, there is no way to get rid of interest because it is a loan. The system works.
So, this means that you should not buy a house until you have the full amount?
If you can, that’s good. But for most of us, this may not be a viable option.
Take home loan through mutual funds, interest free
Will recover the interest amount you pay. Invest in a mutual fund. Start 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 above.
If you start a monthly SIP of 6400 (0.16% of the loan amount), then your investment will be 12% average annual return totaling 63.31 lakhs in 20 years.
From this fund, even if you deduct your invested amount, which is 15.36 lakhs, you will still have 47.95 lakhs in your hands, which is more than enough to cover the interest you will pay.
This calculation holds for every loan amount. If you have planned or are taking a loan to buy your dream home, then you will have to pay interest costs.
But with a small SIP, you can easily recover the entire amount.
However, this will only become a reality, when you keep investing that amount and demonstrate patience.
Want to invest to make your home loan interest-free? Invest in a 0% commission direct plan from top mutual funds.