Burdened by a Long Home Loan? Try THIS Investment Hack to Save Big on Interest

Everyone dreams of their own house, but the long loan tenure can be a headache. What if you could clear your home loan faster and also save lakhs in interest? This smart trick using mutual funds might be the answer.

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Everyone's Dream

Buying your own house is a big life goal for most of us. Many people spend 15 to 20 years just paying off EMIs. But business experts say that with some smart financial planning, you can not only clear your home loan much faster but also make some extra money on the side.

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Precautions Before Taking a Home Loan

Before you even sign the loan papers, it's crucial to think about your job stability. In today's world, jobs can be unpredictable. That's why it's a good idea to build an emergency fund or a mutual fund portfolio first. For instance, if you plan to buy a house worth ₹70 lakh, creating a mutual fund portfolio of ₹1 crore beforehand ensures you won't face trouble even if you lose your job.

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Why a Longer Tenure is Better Than a Shorter One

Most people opt for a 15-year loan to pay less interest. But experts suggest choosing a longer tenure, like 20-25 years. Here's the logic: home loan interest rates are low, around 8.5% to 9%. You should take the difference in EMI between a 15-year and a 20-year loan and invest it in a mutual fund instead.

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The Mutual Fund Magic

Let's take an example. For a ₹50 lakh loan, the EMI for 15 years is about ₹49,000, and for 20 years, it's ₹43,000. The difference is ₹5,800. If you invest this amount every month in a Nifty index fund that gives 12% returns, you'll have nearly ₹32 lakh after 15 years. You can use this to pay off the rest of your loan and still be left with ₹11 lakh!

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Invest in Mutual Funds

If you get some extra cash, don't rush to prepay your loan. Business experts suggest you can earn more by investing that money in mutual funds. They also warn people not to get emotional and dip into their retirement savings just to buy a house.