Rs 55 lakh Home Loan vs Rs 55 lakh SIP investment: Which can be faster route to arrange money for Rs 61 lakh home? Know here
Rs 55 lakh Home Loan vs Rs 55 lakh SIP investment: One can take a home loan to purchase a home, or they can start a SIP investment, generate a corpus, and use that money to buy a home with a huge down payment or in cash.
Rs 55 lakh Home Loan vs Rs 55 lakh SIP investment: Buying a home is a major financial goal. One needs a significant amount for it amid the trend of rising property prices. Arranging such a large amount in one go is out of reach for many individuals. So, a lot of them rely on a home loan. In the second scenario, people don't take a home loan or buy a home at all. Rather, they initiate an investment for the long term, gather a corpus, and achieve their financial goal. Buying a home can be one of the major financial goals they can achieve through such an investment. But the important question is, should one take a home loan or start an investment to buy a home?
Photos: Unsplash/Pixabay
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
Pros of owning home
Not all purchases can be weighed in terms of finance. A person may buy a home for reasons such as building their own asset, avoiding landlord hassles, emotional security, avoiding uncertainty such as untimely termination of lease, availaing tax benefits, as a form of investment.
Costs of owning home
Maintenance cost, upfront cost, property taxes, difficulty in relocating in the future, and chances of decreased home value can be some of the reasons that can be considered as the cons of owning a home.
Age factor
Age can be an important factor when one decides to buy a home. If someone is in their mid-20s or early 30s, they have more working years and have more years to buy a home.
But if someone is in their late 30s or early 40s, they have fewer working years and may prefer purchasing a home over investment.
Cost of investment delay
If one gets compound growth in their investment, delaying it by a few years can cost dearly in the long term. In such a situation, even if one buys a home, they can start an investment simultaneously, even if the amount is not large.
What can be outcome?
It depends on a person's priorities and financial goals in life. They can gauge their financial situation and earning capacity to take a call.
Home loan calculation
We will take the example of a Rs 55 lakh home loan. The interest rate is 9.5 per cent and the loan tenure is 25 years.
What will be home loan EMI?
The home loan EMI will be Rs 48,053.
What will be interest and repayment amounts?
The estimated interest will be Rs 89,15,995, and the estimated repayment amount will be Rs 1,44,15,995.
SIP investment
Since we are discussing Rs 55 lakh loan. Our SIP investment amount in 25 years (300 months) will be the same. On a monthly basis, it will come out to be Rs 18,333. The rate of annualised return will be 12 per cent.
Corpus from SIP investment in 10 years
The investment in 10 years will be Rs 21,99,960, and the estimated corpus will be Rs 42,59,472.
Corpus from SIP investment in 15 years
The investment in 15 years will be Rs 32,99,940, and the estimated corpus will be Rs 92,50,392.
Corpus from SIP investment in 20 years
In 20 years, the total investment will be Rs 43,99,920, and the estimated corpus will be Rs 1,83,17,379.
Corpus from SIP investment in 25 years
The invested amount in 25 years will be Rs 54,99,900, and the estimated corpus will be Rs 3,47,89,344.
Cost of home
We are calculating for a Rs 55 lakh home. If we include a 10 per cent down payment, the estimated cost of the home will be Rs 61 lakh.
Cost of home in 20 years
At 5 per cent annualised price rise, the cost of the home will be Rs 1,61,85,116. It means one may need that much money to buy the home.
We are not including the rent one will pay during that period. Also, we are not including the capital gain tax one will pay on the SIP corpus.