Home Loan Prepayment vs Mutual Fund SIP Calculator 2026
Compare prepaying your home loan early vs investing surplus funds in a mutual fund equity SIP to maximize total wealth.
Loan & Investment Parameters
₹
₹5.00 L₹3.00 Cr
%
6.5%14%
Yrs
5 Yr30 Yrs
₹
₹1,000₹1.00 L
%
Long-term Nifty 50 historical average: 12-14%
8%18%
- Standard Monthly EMI:
- ₹43,391 /mo
- Total Interest (Without Prepayment):
- ₹54.14 L
SIP Strategy Outperforms Prepayment!
SIP generates ₹22.01 L MORE Wealth!
- Wealth Advantage
- +₹22.01 L
- Investing surplus in a 12% equity SIP yields ₹22.01 L MORE post-tax wealth than prepaying an 8.5% home loan.
Strategy 1: Prepay Loan
Guaranteed Return- New Loan Tenure
- 12.9 Years
- ⚡ Saves 7.1 Years of EMIs!
- Monthly Payment:
- ₹53,391 /mo
- Total Interest Paid:
- ₹32.35 L
- Total Interest Saved:
- ₹21.79 L
- Post-Loan SIP Corpus:
- ₹71.71 L
- Net Wealth at Yr 20:
- ₹68.57 L
Strategy 2: Invest in SIP
Highest Wealth- Accumulated SIP Corpus
- ₹90.58 L
- Post-Tax (12% p.a.) · Compounding Growth
- Monthly SIP Amount:
- ₹10,000 /mo
- Total Capital Invested:
- ₹24.00 L
- Pre-Tax Future Corpus:
- ₹99.91 L
- Estimated 12.5% LTCG Tax:
- -₹9.33 L
- Net Wealth at Yr 20:
- ₹90.58 L
Year-by-Year Loan Amortization & Wealth Accumulation Schedule
Show as
- Year 1
- Standard Loan Balance
- ₹49.00 L
- Prepaid Loan Balance
- ₹47.76 L
- SIP Investment Corpus
- ₹1.28 L
- Wealth Leader
- SIP (+₹1.28 L)
- Year 2
- Standard Loan Balance
- ₹47.92 L
- Prepaid Loan Balance
- ₹45.32 L
- SIP Investment Corpus
- ₹2.72 L
- Wealth Leader
- SIP (+₹2.72 L)
- Year 3
- Standard Loan Balance
- ₹46.74 L
- Prepaid Loan Balance
- ₹42.66 L
- SIP Investment Corpus
- ₹4.35 L
- Wealth Leader
- SIP (+₹4.35 L)
- Year 4
- Standard Loan Balance
- ₹45.46 L
- Prepaid Loan Balance
- ₹39.77 L
- SIP Investment Corpus
- ₹6.18 L
- Wealth Leader
- SIP (+₹6.18 L)
- Year 5
- Standard Loan Balance
- ₹44.06 L
- Prepaid Loan Balance
- ₹36.62 L
- SIP Investment Corpus
- ₹8.25 L
- Wealth Leader
- SIP (+₹8.25 L)
- Year 6
- Standard Loan Balance
- ₹42.54 L
- Prepaid Loan Balance
- ₹33.19 L
- SIP Investment Corpus
- ₹10.58 L
- Wealth Leader
- SIP (+₹10.58 L)
- Year 7
- Standard Loan Balance
- ₹40.89 L
- Prepaid Loan Balance
- ₹29.47 L
- SIP Investment Corpus
- ₹13.20 L
- Wealth Leader
- SIP (+₹13.20 L)
- Year 8
- Standard Loan Balance
- ₹39.09 L
- Prepaid Loan Balance
- ₹25.41 L
- SIP Investment Corpus
- ₹16.15 L
- Wealth Leader
- SIP (+₹16.15 L)
- Year 9
- Standard Loan Balance
- ₹37.13 L
- Prepaid Loan Balance
- ₹20.99 L
- SIP Investment Corpus
- ₹19.48 L
- Wealth Leader
- SIP (+₹19.48 L)
- Year 10
- Standard Loan Balance
- ₹35.00 L
- Prepaid Loan Balance
- ₹16.18 L
- SIP Investment Corpus
- ₹23.23 L
- Wealth Leader
- SIP (+₹23.23 L)
- Year 11
- Standard Loan Balance
- ₹32.68 L
- Prepaid Loan Balance
- ₹10.95 L
- SIP Investment Corpus
- ₹27.46 L
- Wealth Leader
- SIP (+₹27.46 L)
- Year 12
- Standard Loan Balance
- ₹30.15 L
- Prepaid Loan Balance
- ₹5.26 L
- SIP Investment Corpus
- ₹32.23 L
- Wealth Leader
- SIP (+₹32.23 L)
- Year 13
- Standard Loan Balance
- ₹27.40 L
- Prepaid Loan Balance
- 🎉 Loan Paid Off!
- SIP Investment Corpus
- ₹37.59 L
- Wealth Leader
- SIP (+₹37.05 L)
- Year 14
- Standard Loan Balance
- ₹24.41 L
- Prepaid Loan Balance
- 🎉 Loan Paid Off!
- SIP Investment Corpus
- ₹43.64 L
- Wealth Leader
- SIP (+₹36.20 L)
- Year 15
- Standard Loan Balance
- ₹21.15 L
- Prepaid Loan Balance
- 🎉 Loan Paid Off!
- SIP Investment Corpus
- ₹50.46 L
- Wealth Leader
- SIP (+₹35.23 L)
- Year 16
- Standard Loan Balance
- ₹17.60 L
- Prepaid Loan Balance
- 🎉 Loan Paid Off!
- SIP Investment Corpus
- ₹58.14 L
- Wealth Leader
- SIP (+₹34.14 L)
- Year 17
- Standard Loan Balance
- ₹13.75 L
- Prepaid Loan Balance
- 🎉 Loan Paid Off!
- SIP Investment Corpus
- ₹66.79 L
- Wealth Leader
- SIP (+₹32.91 L)
- Year 18
- Standard Loan Balance
- ₹9.55 L
- Prepaid Loan Balance
- 🎉 Loan Paid Off!
- SIP Investment Corpus
- ₹76.54 L
- Wealth Leader
- SIP (+₹31.52 L)
- Year 19
- Standard Loan Balance
- ₹4.98 L
- Prepaid Loan Balance
- 🎉 Loan Paid Off!
- SIP Investment Corpus
- ₹87.53 L
- Wealth Leader
- SIP (+₹29.96 L)
- Year 20
- Standard Loan Balance
- ₹101
- Prepaid Loan Balance
- 🎉 Loan Paid Off!
- SIP Investment Corpus
- ₹99.91 L
- Wealth Leader
- SIP (+₹28.21 L)
| Year | Standard Loan Balance | Prepaid Loan Balance | SIP Investment Corpus | Wealth Leader |
|---|---|---|---|---|
| Year 1 | ₹49.00 L | ₹47.76 L | ₹1.28 L | SIP (+₹1.28 L) |
| Year 2 | ₹47.92 L | ₹45.32 L | ₹2.72 L | SIP (+₹2.72 L) |
| Year 3 | ₹46.74 L | ₹42.66 L | ₹4.35 L | SIP (+₹4.35 L) |
| Year 4 | ₹45.46 L | ₹39.77 L | ₹6.18 L | SIP (+₹6.18 L) |
| Year 5 | ₹44.06 L | ₹36.62 L | ₹8.25 L | SIP (+₹8.25 L) |
| Year 6 | ₹42.54 L | ₹33.19 L | ₹10.58 L | SIP (+₹10.58 L) |
| Year 7 | ₹40.89 L | ₹29.47 L | ₹13.20 L | SIP (+₹13.20 L) |
| Year 8 | ₹39.09 L | ₹25.41 L | ₹16.15 L | SIP (+₹16.15 L) |
| Year 9 | ₹37.13 L | ₹20.99 L | ₹19.48 L | SIP (+₹19.48 L) |
| Year 10 | ₹35.00 L | ₹16.18 L | ₹23.23 L | SIP (+₹23.23 L) |
| Year 11 | ₹32.68 L | ₹10.95 L | ₹27.46 L | SIP (+₹27.46 L) |
| Year 12 | ₹30.15 L | ₹5.26 L | ₹32.23 L | SIP (+₹32.23 L) |
| Year 13 | ₹27.40 L | 🎉 Loan Paid Off! | ₹37.59 L | SIP (+₹37.05 L) |
| Year 14 | ₹24.41 L | 🎉 Loan Paid Off! | ₹43.64 L | SIP (+₹36.20 L) |
| Year 15 | ₹21.15 L | 🎉 Loan Paid Off! | ₹50.46 L | SIP (+₹35.23 L) |
| Year 16 | ₹17.60 L | 🎉 Loan Paid Off! | ₹58.14 L | SIP (+₹34.14 L) |
| Year 17 | ₹13.75 L | 🎉 Loan Paid Off! | ₹66.79 L | SIP (+₹32.91 L) |
| Year 18 | ₹9.55 L | 🎉 Loan Paid Off! | ₹76.54 L | SIP (+₹31.52 L) |
| Year 19 | ₹4.98 L | 🎉 Loan Paid Off! | ₹87.53 L | SIP (+₹29.96 L) |
| Year 20 | ₹101 | 🎉 Loan Paid Off! | ₹99.91 L | SIP (+₹28.21 L) |
Net Wealth Trajectory Over Time (Prepayment vs SIP)
Comparing accumulated financial wealth between early prepayment + post-loan SIP vs continuous mutual fund compounding.
Prepay or invest, with your numbers
Standard Formula
D = C − W
Live Calculation (Plugging Your Values)
Monthly surplus (S):₹10,000
Interest saved by prepaying (I):₹21.79 L
SIP corpus after tax (C):₹90.58 L
Prepay path: SIP of EMI + surplus after the loan closes, after tax (W):₹68.57 L
Difference (D):₹22.01 L
Substituted Equation:
D = ₹90.58 L − ₹68.57 L = ₹22.01 L
Better option:Strategy 2: Invest in SIP
Prepaying earns a guaranteed return equal to your loan rate and is tax-free. The SIP has to beat that rate after 12.5% LTCG to win, and it carries market risk while the saving does not. Both sides here are compared after tax, which is the only fair way to read the gap.
Prepayment vs Mutual Fund SIP: Decision Framework
When to Choose Home Loan Prepayment
- High Interest Rate: If loan interest rate is above 9.0%–9.5% p.a.
- Risk Aversion: You prefer guaranteed, risk-free savings over market volatility.
- Peace of Mind: Emotional satisfaction and mental relief of being 100% debt-free.
- Job Volatility: If income is uncertain, eliminating fixed monthly EMIs reduces stress.
When to Choose Mutual Fund SIP
- Return Spread: Equity returns (12–14%) comfortably beat home loan rates (8.5%).
- Liquidity: Mutual fund investments can be partially redeemed in emergencies.
- Power of Compounding: Money invested early has 15–20 years of compounding growth.
- Tax Deduction (old regime only): On the old regime, interest on a self-occupied home is deductible up to ₹2,00,000 a year under Section 24(b), so prepaying gives some of that up. The new regime, the default, allows no such deduction on a self-occupied home.
References
Frequently Asked Questions — Prepayment vs SIP
Should I prepay my home loan or invest in a SIP?
Compare the loan rate with the post-tax return you can realistically expect. Prepaying a 9% loan is a guaranteed 9% return. An equity SIP might return 12% pre-tax, about 10.5% after LTCG — a thin premium for taking market risk. Above 9.5% on the loan, prepaying usually wins.
How do home loan tax benefits change the comparison?
Substantially, under the Old Regime. A ₹2 lakh Section 24(b) deduction at the 30% slab cuts the effective loan rate by roughly 1%–1.5% in the early years, tilting the answer toward investing. Under the New Regime there is no such deduction on a self-occupied house, so the loan's full rate applies.
Is there a middle path between prepaying and investing?
Yes, and it is what most people should do: prepay enough to keep the tenure under about 15 years, and invest the rest. That caps the interest bill, which is front-loaded, while still building a liquid corpus you can actually access — unlike equity locked in your walls.
When is prepaying clearly the wrong choice?
When it drains your emergency fund, when you have costlier debt outstanding (a personal loan or card balance), or when you have not yet used your Section 80C limit. Money in a house is illiquid — banks do not refund prepayments when you lose your job.
How does the comparison look under the new regime specifically?
The new regime is the default and it gives a self-occupied house no section 24(b) on interest and no section 80C on principal, so the loan costs you its full rate. Prepaying an 8.75% loan is then a risk-free, tax-free 8.75% return. An equity SIP at 12% before tax comes to roughly 10.5% after LTCG at 12.5%. The gap of under 2 percentage points is the entire payment for taking market risk, which is why prepayment is a defensible choice for most new regime borrowers.
Should I split between prepaying and investing, and in what ratio?
Splitting is usually the sensible answer because it hedges both ways. A common approach is to direct the annual bonus to prepayment and keep the monthly surplus in a SIP, or to split roughly 50-50 once the emergency fund and term cover are in place. On a Rs 50 lakh, 20-year loan at 8.5%, a single Rs 5 lakh prepayment in year three removes about 42 months of EMIs and saves roughly Rs 13 lakh in interest, while the SIP keeps building something you can actually redeem.
Does the answer change in the last five years of the loan?
Yes, and it flips towards investing. Interest in a home loan is front-loaded, so by the final years most of each EMI is principal and prepaying buys you very little interest saving. On the last Rs 8 lakh of a 20-year loan there is only a few lakh of interest left to avoid, and a five-year SIP has time to compound. Keep the loan running, keep the liquidity, and prepay only if the emotional value of being debt free outweighs a thin financial edge.
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How to Recover Home Loan Interest with SIP (and When It Fails)
SIP to recover home loan interest: ₹5,500 a month on ₹50L, ₹10,900 on ₹1 crore (8.5%, 20 years, 12% return). Table from ₹25L to ₹1.5Cr, plus the 8% case.