Should you put extra money into your home loan or start a SIP? This calculator shows which strategy builds more wealth over your chosen time horizon, factoring in tax deductions and post-tax returns.
Compare two strategies for your extra cash: prepaying your home loan to save interest and become debt-free faster, or investing via SIP to potentially build a larger corpus. See month-by-month projections, net worth comparison, and find the break-even point.
= Fifty Lakh Rupees
Monthly EMI
₹43,391
= Ten Thousand Rupees
Extra amount added to EMI every month
Equivalent monthly investment for SIP: ₹10,000
This amount will be used for SIP comparison
Conservative: 10%, Moderate: 12%, Aggressive: 14%
The Winner (at end of loan tenure)
📈 SIP Investment
Advantage
₹1.00 Cr
Break-even: SIP catches up at month 2 (Year 1)
Interest Saved
₹21.79 L
Time Saved
7 years 2 months
Loan Closed In
12 years 11 months
Total Paid (EMI + Prepayment)
₹82.35 L
Final Corpus
₹1.00 Cr
Total Invested
₹24.10 L
Gains
₹75.91 L
LTCG Tax
- ₹9.33 L
Post-Tax Corpus
₹90.68 L
Net worth = Assets (SIP corpus) - Liabilities (Loan balance). Prepayment path shows faster debt reduction; SIP path shows corpus growth alongside loan repayment.
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This calculator simulates two parallel scenarios month-by-month:
The winner is determined by comparing net worth at the end of the original loan tenure.
Home Loan Prepayment Calculator
Focus on prepayment strategies and interest savings
Universal Loan Manager
Manage active loans with part-payment planning
SIP Calculator
Detailed SIP projections with step-up and tax
SWP Calculator
Plan retirement withdrawals from your corpus
Rent vs Buy Calculator
Should you rent or buy a home?
It depends on your loan interest rate vs expected SIP returns. If your loan rate is higher than expected post-tax SIP returns, prepaying saves more. If SIP returns exceed loan rate after taxes, investing may build more wealth. This calculator shows the exact comparison for your scenario.
Long-term capital gains (LTCG) on equity mutual funds are taxed at 12.5% above ₹1.25 lakh exemption. This reduces your effective SIP returns. Loan prepayment savings are tax-free, making the comparison closer than raw returns suggest.
The break-even point is when your SIP corpus minus remaining loan equals the wealth you would have if you had prepaid. Before this point, prepayment is ahead; after, SIP is ahead. This calculator shows the exact month.
Yes, prepaying a loan gives you a guaranteed return equal to your loan interest rate. For an 8.5% loan, every rupee prepaid effectively earns 8.5% risk-free. SIP returns are market-linked and not guaranteed.
A balanced approach often works best: prepay enough to stay comfortable with your debt, and invest the rest for long-term growth. This calculator helps you understand the trade-offs to find your optimal split.
Inflation erodes the real value of money. Your loan EMI stays fixed, so it becomes relatively easier to pay over time. SIP returns, when adjusted for inflation, give you real purchasing power. This calculator shows inflation-adjusted values.
Disclaimer: This calculator provides estimates for educational purposes only. Actual returns on investments can vary significantly. Loan terms and prepayment options depend on your lender's policies. Tax laws may change. Consult a financial advisor before making major financial decisions.
The core logic: compare your post-tax effective loan rate against your expected post-tax investment return.
| Home Loan Rate | Old Regime (post-tax 30% slab) | New Regime | vs SIP @11% net | Verdict |
|---|---|---|---|---|
| 7.5% | 5.25% | 7.5% | 11% net SIP | SIP wins |
| 8.5% | 5.95% | 8.5% | 11% net SIP | SIP wins |
| 9.5% | 6.65% | 9.5% | 11% net SIP | Borderline |
| 10.5% | 7.35% | 10.5% | 11% net SIP | Prepay favoured |
| 12%+ | 8.4%+ | 12%+ | 11% net SIP | Prepay |
Old regime assumes ₹2L Section 24(b) deduction fully absorbed. SIP net return = 12% equity CAGR less 12.5% LTCG on gains above ₹1.25L/year ≈ 11% effective long-term.
The Reserve Bank of India (RBI circular DBOD.Dir.BC.No.107/13.03.00/2011-12, June 2012) prohibits banks from charging foreclosure charges or prepayment penalties on floating-rate home loans from individual borrowers. The National Housing Bank (NHB) issued a similar directive for housing finance companies in August 2019. You can prepay any amount at any time on floating-rate loans — there is no charge.
Before finalizing a strategy, verify your lender's fixed-rate penalty, annual part-payment limits, and closure workflow.
No. The RBI circular dated June 2012 (DBOD.Dir.BC.No.107/13.03.00/2011-12) prohibits banks from charging prepayment penalties on floating-rate home loans. This was extended and reinforced by NHB in August 2019. Fixed-rate loans may still carry prepayment charges, so check your loan agreement.
The decision depends on your effective post-tax loan interest rate vs expected post-tax SIP returns. If your home loan rate is 9% and you are in the 30% tax slab with Section 24(b) deduction, your effective rate is approximately 6.3%. If your SIP expected return is 11–12%, SIP wins. The crossover point is roughly when post-tax loan rate equals expected post-tax returns — around 9–10% for most investors.
The Nifty 50 has delivered approximately 13–14% CAGR over the last 10 years (2015–2025). However, long-term 20-year CAGR is approximately 12%. This calculator uses 11% as a conservative default, representing a 60:40 equity-debt blend (equity at 12%, debt at 7%). Past performance does not guarantee future returns.
Yes. Section 24(b) allows a ₹2 lakh/year deduction on home loan interest under the old tax regime. If you prepay aggressively, your outstanding loan and interest payments reduce — which lowers your Section 24(b) benefit. Under the new tax regime, there is no Section 24(b) deduction anyway, so this factor doesn't apply.
Under the old regime with Section 24(b): effective 8.5% loan rate → 5.95% post-tax cost. Long-term equity SIP at 12% post-tax (after LTCG 12.5% on gains above ₹1.25L) gives ~10–11% net. SIP typically wins. Under the new regime with no 24(b) deduction: effective loan cost stays at 8.5%. SIP at 12% still wins in most scenarios.
If your loan rate exceeds 9.5% (post-tax), prepayment is generally better for guaranteed return. Below 9.5%, a lumpsum SIP in an equity index fund is statistically better over 5+ year horizons. Also consider: emergency fund adequacy, insurance coverage, and whether you have any other high-interest debt (credit card, personal loan) which should always be cleared first.
Yes — and this is often the most practical approach. Many financial planners recommend a 50:50 split for borrowers with rates around 8.5–9%. This gives guaranteed debt reduction while also participating in equity growth. The calculator shows both pure strategies — you can estimate intermediate scenarios mentally.
This calculator is for informational and educational purposes only. Results are estimates based on assumed returns and may not reflect actual outcomes. Consult a SEBI-registered financial advisor before making investment decisions.