EMI or SIP for House Purchase: Buying a house is the dream of many people, but it is not easy due to rising property prices and EMI pressure. Understand from the calculations in this article which option can be better in EMI and SIP for a house worth Rs 50 lakh.
EMI vs SIP for Buying Home: Buying a house is still the dream of crores of people, but the biggest challenge of this dream is arranging money. Amid rising property prices, most people choose the path of home loan, because it helps in getting a house immediately, whereas many experts recommend investing money in SIP (Mutual Fund) instead of taking a loan, with the returns of which one can easily buy a house later. This question is revolving in the minds of middle class and working youth today that if they want to buy a house, then taking a home loan and paying EMI or doing SIP is more beneficial? Decide yourself by calculation…
Why are people confused about home loan?
Taking a home loan means that you become the owner of the house today, but the burden of EMI remains on your head for the next 20-25 years. Between inflation, children’s education, medical expenses and other responsibilities, this burden often becomes heavy. At the same time, the SIP route requires some patience, but in this the money can gradually become bigger. This is why people are confused whether to buy a house immediately by taking a loan or to fulfill this dream by depositing money through SIP?
What to do if you want to buy a house worth ₹50 lakh?
Home loan option
Suppose you took a home loan of ₹ 50 lakh for 20 years, the interest rate of which is 7.9%. For this you will have to pay monthly EMI of ₹ 41,500. Of the money you pay in 20 years, about ₹49.6 lakh goes towards interest alone. That means for a loan of Rs 50 lakh you will have to pay a total of Rs 99.6 lakh. This simply means that the price of the house almost doubles. This also has the advantage that you become the owner of the house immediately, get relief from rent and also get tax exemption, but in the long run, the pressure of EMI can put brakes on savings and other dreams.
SIP option
Now imagine, if you do a SIP of ₹ 41,500 every month for 20 years, whose expected return is 12% per annum, then the total investment in 20 years will be around ₹ 99.6 lakh, but with the returns this amount can increase to around ₹ 4.14 crore. That means you will make a profit of more than ₹ 3 crore. Not only this, if you do this SIP for 7 years, then a fund of about ₹ 55 lakh can be generated, from which a house worth ₹ 50 lakh can be purchased.
Is SIP always better for buying a home?
On paper, the mathematics of SIP looks fantastic. But there is also a truth that the returns in the stock market are not fixed, house prices can also increase significantly in 20 years, discipline and patience are necessary in SIP i.e. SIP is suitable only for those people whose risk appetite is good and who are not under any compulsion to buy a house immediately.
For whom is it right to take a home loan?
- those who need a home now
- whose income is stable
- who want to get rid of the rent
Who is SIP right for?
- who can do long planning
- Those who do not have immediate home pressure
- Who understand the ups and downs of investing
Disclaimer: The information given in this article is for educational and informational purposes only. The calculations and estimated returns given herein do not guarantee actual investment or home loan. Financial plans like home loan or SIP involve risk and returns are not assured. Before taking any investment or loan, definitely consult your financial advisor or bank or mutual fund expert.