Debt-Free Dream Home: A Simple Financial Hack Using SIP Strategy

This is where a simple yet ingenious hack can usher in a new era of financial prudence and freedom

In the world of captivating storytelling and thrilling narratives, "Farzi," an Amazon web series starring Shahid Kapoor, offered an intriguing plot that resonated with many. Amidst the compelling performances, there was a dialogue that left an indelible mark on our minds. Shahid Kapoor's character delivered the line, "Humari poori zindagi loan mein hi nikal jaati hai," succinctly encapsulating the reality that middle-class and lower-middle-class individuals often find themselves ensnared in a cycle of loans and interest payments.

This cinematic insight reflects a profound truth for many, as showcased by the relatable scenario of purchasing one's dream home. Aspiring to own a house is a cherished ambition for those straddling the middle-class spectrum. Homeownership is not just about shelter; it's a testament to status and a testament to aspirations. Yet, the traditional route to achieving this dream often involves taking out hefty loans and committing to extended periods of EMIs, resulting in substantial interest payments over time.

Enter Mr. Vikas, an embodiment of the archetype of the young professional, aged between 31-32, working diligently in an IT company. His dream: to own a home worth Rs 70 lakhs. The journey to his dream home is marked by a loan tenure of 20 years, an average interest rate of 9 percent, and a monthly EMI of Rs 62,981. While these figures may appear to be mere numbers, they encompass a significant financial undertaking.

Delving deeper into the details of Mr. Vikas's home loan, a startling realization emerges. The total amount payable over the loan tenure amounts to a staggering Rs 1.51 crore, with an interest outflow of Rs 81.15 lakhs, dwarfing the principal amount of Rs 70 lakhs. This is where a simple yet ingenious hack can usher in a new era of financial prudence and freedom.

Here’s the complete calculation and details of Home Loan of Mr. Vikas:

• Total Home Loan Amount Rs: 70 lakhs
• Tenure of EMI: 20 years (240 months)
• Interest Rate: 9 per cent (Average)
• EMI Per month- Rs 62,981
• Total Amount Payable- Rs 1,51,15,396 (1.51 crore)
• Principal Amount- Rs 70,00,000
• Interest Amount- Rs 81,15,396

Mr. Vikas's epiphany arrives in the form of a monthly Systematic Investment Plan (SIP). By dedicating 15 per cent of his EMI (Rs 9,450) towards a SIP, he embarks on a journey to a different future. This calculated maneuver culminates in an invested amount of Rs 22.68 lakhs over two decades, with an expected return rate of 12 per cent per annum. The outcome? A monumental corpus of Rs 94.91 lakhs, a transformation that is nothing short of astonishing.

SIP calculation and possible of earnings from SIP

• Monthly SIP: Rs 9,450 per month
• Tenure of SIP: 20 years
• Expected return rate (p.a):  12 per cent
• Invested Amount: Rs 22,68,000 (Rs 22.68 lakhs)
• Estimated Returns: Rs 71,73,948 (Rs 71.73 lakhs)
• Total Value: Rs 94,41,948 (Rs 94.91 lakhs)

The brilliance of this hack lies in its simplicity, transforming interest outflows into a lucrative investment portfolio. Mr. Vikas, along with countless others who follow suit, achieves an interest-free home, augmented by the prospect of property value appreciation over the years.

It's a financial paradigm shift. Instead of surrendering to the clutches of interest, individuals grasp the reins of their financial destiny. A mortgage, once an emblem of debt, metamorphoses into a stepping stone toward wealth creation.

So, dear readers, have you embraced this financial hack or are you contemplating doing so in the event of a home loan?