SIP (Trick) of 1% of the Home Loan amount.

Many call it the SIP trick to compensate for home loan interest.

What exactly is it?

Here is the thread🧵that tries to explain this simple idea 👇👇

(1/n)

Suppose you take a Rs 50 lakh home loan at 8.5% for 20 years. Your EMI will be Rs 43,391 per month. The total interest you pay to the bank will be Rs 54-55 lakh.

So in total, and including principal repayment of Rs 50 lakh as well, you pay the bank Rs 1.05 Cr in 20 years

(2/n)

Now let’s see what is this so-called 1% SIP trick for Home Loans

(3/n)

You start a SIP for the same tenure as your home loan (20 years). The home loan is Rs 50 lakh.

So SIP of 1% of the home loan amount, comes to Rs 50,000 (i.e. 1% of Rs 50 lakh). This is the annual SIP amount.

(4/n)

Converting this annual investment of Rs 50,000 to monthly figures, we have Rs 4167 or Rs 4200 per month – that becomes your 1% SIP investment.

(5/n)