Home Loan Prepayment vs Mutual Fund SIP
Calculate how much interest you save by prepaying your home loan vs investing extra savings into a Nifty 50 equity SIP.
Total principal sanctioned or outstanding
Current floating rate (typically 8.5% to 9.5%)
e.g. SBI MaxGain or ICICI Money Saver balance
The mathematical difference between prepaying your 8.75% loan and investing in SIP is close. A hybrid strategy (50% extra EMI prepayment + 50% SIP) provides peace of mind and wealth growth.
Parking your ₹5,00,000 emergency fund directly in your home loan overdraft account gives you an effective 8.75% tax-free risk-free return on that cash, while keeping it 100% liquid for emergencies.
- • Zero Prepayment Penalty: RBI strictly mandates banks and HFCs to charge zero foreclosure or prepayment fees on floating-rate individual home loans.
- • Principal vs Tenure Choice: Prepaying reduces your outstanding principal directly; you can choose to either shorten loan tenure (recommended) or lower monthly EMI.
- • Section 24(b) Tax Deductions: In Old Regime, interest up to ₹2 Lakh/year is deductible for self-occupied property. Prepaying reduces interest, potentially reducing deductions, but saving 8.5%+ guaranteed interest usually beats tax savings.
- • Overdraft Accounts (SBI MaxGain / ICICI Money Saver): Parking surplus in loan-linked accounts earns savings at the loan interest rate without permanently locking the cash away.
See if refinancing beats prepaying at your current rate.
The main NetCorpus India planner rolls this into a 50-year retirement plan alongside your loans, EPF, taxes, trips, and life goals.