⚖️ Wealth Optimization Engine

SIP vs Home Loan Prepayment Calculator

Should you prepay your home loan or invest your extra monthly cash in an Equity SIP / Index Fund? Compare real net worth outcomes side-by-side.

Loan & Investment Details

Home Loan Outstanding₹ / $

₹

Loan Interest Rate% p.a.

Loan TenureYears

Extra Monthly Cash AvailableFor Prepay or SIP

₹

Expected SIP Return Rate (CAGR)Equity Mutual Funds

Recommended Wealth Strategy

SIP Investment Wins

Extra wealth generated: ₹ 0

Option A: Prepay Loan

Interest Saved:

₹ 0

Loan Closes In:

0 Years

Terminal Corpus (Prepay + Reinvest):

₹ 0

Option B: Pure SIP

Loan Duration:

20 Years

Total Interest Paid:

₹ 0

Total SIP Corpus Built:

₹ 0

Terminal Wealth Comparison

Net Worth Outcome

Mathematical Truth: SIP vs Prepaying Home Loan

The decision between prepaying a mortgage and investing in equity mutual fund SIPs boils down to Arbitrage Rate:

The Golden Formula: If (Expected Investment Return - Long Term Capital Gains Tax) > (Home Loan Interest Rate - Tax Benefit), then SIP produces significantly higher wealth over a 15–20 year time horizon.

When You Should Prepay Home Loan:

You are near retirement (within 5–7 years) and desire zero financial liabilities.
You experience high psychological anxiety with debt.
Home loan interest rates shoot past 9.5%–10.5%.

When You Should Invest in SIP:

You are in your 20s, 30s, or 40s with a 10+ year investment horizon.
You claim tax deductions under Section 24(b), effectively lowering your borrowing cost.
You want to maintain liquid investments for emergencies rather than trapping all capital inside illiquid home equity.

Frequently Asked Questions

Is it better to prepay home loan or invest in mutual fund SIP?

Prepaying your home loan offers a guaranteed, risk-free return equal to your interest rate (e.g. 8.5–9%). Investing in an Equity Mutual Fund SIP historically yields 12–14% over 10+ years, but carries market volatility. If your home loan interest rate is above 9%, prepaying provides peace of mind; if rates are lower and your investment horizon is long, SIP generally builds a larger terminal net worth.

What is the Prepay + SIP hybrid strategy?

The hybrid strategy accelerates your loan payoff (e.g. paying off a 20-year loan in 10 years) and then directs your entire freed-up monthly EMI into Equity SIP for the remaining 10 years. This combines guaranteed debt freedom with exponential compounding.

Does tax benefit change the math between SIP and Prepayment?

Yes. Under the Old Tax Regime in India, interest deduction under Section 24(b) (up to ₹2 Lakhs) effectively reduces an 8.5% interest rate to ~5.95% post-tax for someone in the 30% tax bracket. In that case, investing in mutual funds with 12% returns significantly outperforms loan prepayment.