Home Loan Prepayment vs Mutual Fund SIP Calculator 2026

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.

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.

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 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.

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.

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.

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.