Most of us want to settle the Home loan because of the heavy burden of Interest we have to pay over the Loan taken & in the Span of 20 Years (Standard Loan Time), we would have been Paid more than the Principal amount. This post will introduce you to the magic Formula of Home Loan, a technique that will not only give you back the interest but also the principal amount.
This is a Formula where we can get the Entire money (Principal & Interest) back at the End of the Tenure, almost without breaking a sweat. This is not at all any magic but a practical case of mathematical compounding enabled by a shrewd Investment Strategy. A Good Financial Advisor can any day easily help you to achieve this Goal.
Let’s Understand the Formula with the Help of an Example.
Suppose you took a Home loan worth Rs. 20 Lac @8.5% Annum for 20 Years –
Monthly EMI- Rs. 17356.
Total Payment in 20 years – Rs. 41, 65,552 (Principal – Rs. 20, 00,000 + Interest Rs. 21, 65,552)
Now Start a SIP of 20% of the Loan Amount in a Good Sector or Small Cap Fund (Expected Return 15% with 20 Year Horizon) with the Help of Your Financial Advisor.
SIP Amount – Rs. 3500 Time –20 years,
Return Target –15% –
Total Invested Amount- Rs. 8,40,000
Gain – Rs. 44, 65,842 Total Corpus Accumulated – Rs. 53, 05,842
Return – Rs. 53, 05,842- Rs. 41, 65,552 (Loan paid) – Rs. 8, 40,000 (Invested Amount) = Rs. 3, 00,290
You get your home almost Free with 3Lac Profit if managed the EMI properly.
Contrary to the word magic in title The magic Formula of Home Loan , this formula is anything but magic. This is a classical example of Financial Planning and Systematic Investments.
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