Updated: Mar 10, 2021
A lot of clients we deal with, are repaying a home loan and this is their most asked question -
"Should I repay my home loan first and then start investing?"
Nivesh Mitr's Recommendation
Earn the Home Loan Interest Amount you will pay, by Investing in Mutual Funds
What do we mean?
Let us understand it with an example -
Hence, in the above example, the wealth you generated of Rs.28,47,000/- on your SIP investment offsets the interest you're paying on the home loan.
Note: If you're already halfway through your home loan, we can still create a solution for you to help you earn back the interest you're paying! Contact our team now to create a customized solution for you.
Point No. 2
We analysed both the scenarios,
Scenario 1 - Repay Home Loan First & then Start Investing (double the amount of Scenario 2)
Scenario 2 - Repay Home Loan & Start Investing Simultaneously
Conclusion: Even though in Scenario 1, you invested double the amount as in Scenario 1, the portfolio value is less than half in Scenario 1.
Reason: Effect of Compounding! The more time your money is invested in markets, more money it will create, irrespective of the investment amount.
Team Nivesh Mitr