His payment details are as below.
|
EMI |
Principal |
Interest Paid |
Total Amount |
|
31,490.41 |
3,500,000 |
4,057,698.4 |
7,557,698.4 |
You can check our home loan calculator.
Now consider various options Mr. Sundar has in managing the home loan
1) A)Does Mr. Sundar wants to get back the interest paid to the bank ?
From the above example, Mr. Sundar is paying an interest of around Rs Rs
4,057,698.4. Let’s see various options in which he can get back his interest
payed to the bank.
a) If Mr. Sundar has a little more paying capacity
for a SIP (Systematic Investment Plan) of Monthly Rs 2680
along with the home loan. Let us see what wonders it can do to Mr. Sundar.
|
Monthly SIP |
Expected
return |
Tenure |
Amount
Invested |
Return |
Total |
|
2680 |
15 |
20 years |
6,43,200 |
34,19,559 |
40,62,759 |
The total return value of Rs 40,62,759
can help Mr. Sundar to free him from the interest payed to the bank on his home
loan. Just understand how an extra investment of Rs 2680 can be benefitted to Mr.
Sundar and his family.
b) In case if Mr Sundar does not
have more paying capacity for a SIP ,he can check with the bank and increase
the tenure for some more period for his loan .Suppose the bank agrees to
increase the tenure from 20 years to 27 years .Lets see how this can be managed
by Mr Sundar.
|
Monthly EMI |
Amount Paid |
Interest Paid |
Principal
Paid |
|
28,788.49 |
9,356,259.25 |
5,856,259.25 |
3,500,000. |
Here Mr Sundar is paying an interest amount of Rs 5,856,259.25. Now Mr
Sundar can use the difference of the initial balance of monthly EMI of Rs
31,490.41-28788.49 = Rs 2702 as SIP and can get the same benefits of the
earlier situation
2) B) Does Mr Sundar wants to pay less to his home loan ?
Mr sundar can check with various banks who can offer better interest rates
for a home loan and can transfer the home loan to the respective bank.Lets
suppose another bank offers home loan at 8.5% .See how Mr Sundar can be benifitted
from that 0.5 % change
|
|
Interest |
Tenure |
Principal |
Interest |
Total
Amount |
EMI |
|
Bank
A |
9 |
20 |
35,00,000 |
4,057,698.4 |
7,557,698.4 |
31,490.41 |
|
Bank
B |
8.5 |
20 |
35,00,000 |
3,526,096 |
7,026,096 |
29,275.4 |
With a small change of 0.5% there is a huge variation in the amount
collected by bank at the end of tenure. It would be wise to transfer the loan
to the bank with the less interest rates. Along with with this you can also
check if there are any fees like processing fees etc while transferring the
loan to the other bank. Considering the benefits of transferring the loan the
extra charges might not have huge impact.
3) C) Does Mr Sundar want to close the home loan early ?
a) If Mr sundar wants to
close the home loan early,he can repay part of the principal whenever he has some some money.So the interest will
be calculated on the remaining principal only
Lets suppose Mr Sundar could
accumulate an amount of Rs 5,00,000 at the second year of taking home loan.Now
he can pay back to the bank and he can reduce the principal on which he is
paying the loan amount.
b)
If Mr sundar has some more paying capacity he can check with the bank
and pay the extra EMI as principal that can be cleared of early.