SIP Vs EMI’s

Today We will be comparing Bank EMI’s vs Mutual Fund SIP’s.

Will deep dive into how SIP can benefit over EMI and how dedicating more of your savings to SIP will benefit you largely.

You can recover House Cost with just 26% of EMI cost.

Meaning instead of paying 100 rs as EMI every month for 20 years you can accumulate the same amount of wealth if you do SIP of just 26 rs.

Let’s hop on to some calculations. Suppose you are taking EMI of 70L for the term of 20 years. Considering rate of interest of 7.8% Monthly EMI comes around 58K. If we go deep into calculations we see that over period of time we are making interest payment as equal as Principal payment. In this case 68L. We can obviously see we are making the bank rich.

Now Lets compare this with SIP, as depicted below only SIP of 15K per month is creating wealth of 1.4 Cr covering the cost of House. And its only 26% of cost of EMI.

What this tells us is if you just do SIP of 26% of EMI you can easily cover the cost of your house over the period.

How can we make use of this ?

Living in rented house and paying the remaining EMI amount in SIP.

Generally Rent is around 3% of House amount in our case consider it as 90L. Then rent comes around 22,000. If you do SIP of remaining EMI amount 34,000 you will get whopping 3.1Cr. This way you will be able to purchase the house and have much more extra cash in Hand.

Don’t Buy House for Investment purpose

Just in case you already have House and don’t have urgency to purchase it. Do SIP of 58K which is equivalent to amount of EMI for period of 20 years you will be surprised it will be whopping 5.3Cr. Purchasing house for Investment purpose is bad idea.

Delay the house purchase as much as possible

If your job location or geography is not fix or planning to purchase for short duration which is the scenario for most of the people then try to delay the House Purchase as much as possible to and dedicate amount to SIP’s towards Goal

Already Purchase ? No worries

If you have already purchased the flat on EMI then you should try to do SIP of at least 26% of EMI amount. This will help you to prepay home loan and thus reduce the EMI burden.

It’s said House is the product created by banks to lend money. Bank can’t lend money for money they need product in the middle to lend money and that product is House.