Suggestions for Home Loan strategy

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Wingman
RamSun97
Hi.

I have a home loan from SBI for 25L taken for tenure 30 years. I am planning to use the below strategy to extract the maximum benefit out of it. Please let me know your thoughts or suggestions on it.

Since my tenure is 30 yrs, monthly emi comes out to be 21k. I have the capacity to pay monthly emi upto 25k.

If I pay monthly emi of 25k I can finish the loan in 15 yrs. But I don't want to do that. My plan is to pay 21k monthly emi (for 30 yrs) and invest the remaining 4k in index fund Sip which can give me 12% to 14% returns in the long term for 30 yrs. A simple calculation shows that this sip can give returns of more than 1 crore after 30 yrs.

I know that opting for 30 yrs tenure in home loan would increase the total interest outgo. I will have to pay 50L interest along with 25L principal for 30 yrs home loan. But I am okay with this 3x payment because I am getting even better returns with the SIP. I don't have plans to buy another house in future.

In short, I will be recovering more than the entire 3x payment made for home loan from the 4k monthly SIP. Also this strategy maximises the tax benefits.

Please let me know your thoughts if this is practically feasible or has anybody achieved this before.
(I am ready to make ad-hoc prepayments here and there to maximise the tax benefits under section 80C.)

Feel free to comment your strategies as well.

Thanks in advance.
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@Ramta_Jogi

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First and foremost, take insurance for home loan cover.

Secondly, take term insurance out of that monthly 4K remaining from home loan.

As @noobDealer rightly said, you need to tone down your expectations from index fund to 9-10%. Going forward by 3 generations (30 years) we don't know how equity gains would be taxed (higher) & that would reduce your returns accordingly.

If i was you, I'd try to clear my home loan asap rather than try these stunts. All debt, i feel, is like a hanging sword on you n your family. Can't lose sleep over it.

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Deal Subedar Deal Subedar
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if you're comfortable with 10% cagr it's probably fine.12-14% happens in good times. Returns depends on where you invest too also no one knows the future

Critic Critic
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A better comparison: You complete your loan in 15 years with 25K emi, then the next 15 years you do a 25K sip; This should beat down the returns of 30 years with 21K emi and 30 years with 4k sip and the home loan tax exemption benefit.
@guest_999 @Ramta_Jogi
Wingman Wingman
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Thanks for your idea. I considered this idea as well initially. 

If I close my loan in 15 years, then from year 15 to 30, I can invest only 16k sip per month not 25k, because of 30% tax (8k). This 8k can be minimized if I move to new tax regime, but still it won't be 25k fully, it will be little less. 

Lets assume, I close my loan in 15 yrs, from year 16 I move to new regime and I am left with 20k for sip each month (post-tax). SIP calculator says I can accumulate 69L after the 30th year. (20k sip for 15 yrs with 9% returns with 10% ltcg and 0.3% expense ratio).

Some points to note here: 
1. As I have already told, if I complete it in 15 yrs, chances are very likely that my family will force me for another home, which will spoil all my plans. 
2. This plan gives me 69L returns instead of the earlier 60L, so it is 9L extra. The important point here is, if I just extend my SIP tenure by 5 years from 30 to 35 yrs, then the returns of 4k SIP would jump from 60L to 97L. An increase of 37L for just extending it by 5 yrs, purely bcoz of compounding! This plan is very possible, bcoz 4k monthly is so small that even after the retirement I can continue this SIP for another 5 years to get 37L more returns. This is not possible with your 20k sip plan bcoz, I can't afford to make 20K monthly SIP after retirement. So I am risking this 9L to get 37L more, not a bad deal for me. 
3. Also, I believe that as age increases fear will increase which won't allow us to invest in equity rather go for safer options like FD, debt funds etc.. This shouldn't be the case with the 4k sip plan, bcoz it should be small portion of my salary at that time. 

Please let me know if you agree with these points. @BlueFlash
Beacon Beacon
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Here assumption is index will give u 10% return.

Some countries (Japan & now hang sang) have absolute return of 0% in 15 years (although Time bias is there). Although it is less likely to happen for India, but there is no surety.

So consider this aspect also. Of course tax saving is advantage.

Wingman Wingman
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Thanks. I wasn't aware of this. 

I just want 9% returns for this plan to work. So index fund + NPS or voluntary contr to PF can be used right ? or any other less-risk path to get 9% returns in long-term ? @drjpatwa
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I too have somewhat similar situation. I have all sort of insurances covered . Till last I had same thought process as you but off late I realized that there is no substitute to "peace of mind". Living a debt free life is a privilege specially for middle/salary class people like me. I have SIPs too going on multiple MFs (Sips started before taking loan so not stopping them) . What I have decided to do is use any sort of bonus/additional income / arrears/ extra allowance which I receive I deploy that to pay off the debt. Earlier all these used to go in equity.
Wingman Wingman
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Thanks. 

I agree. The problem for me is that, I am not able to invest a fixed portion of my salary due to my lifestyle. So was trying to reduce the home loan emi and carve out a small SIP portion out of it, whose returns I could use for my post-retirement life. 
Deal Subedar Deal Subedar
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@RamSun97

Your whole idea of investment, insurance and loan hangs on such a lengthy duration of time.

With rapidly changing times, you will witness a generation not too far away where LTCG will be taxed at least 30%.

Most importantly, in near future, index funds return may not garner more than 5% p.a.

Believe it or not, at present, some developed countries are already showing 0% return.

Between 2046 and 2050, India may have become a developed country or on the verge of becoming one, so major investment, loan and economic scenarios will change drastically.

I strongly recommend to close your existing home loan(s) before 2040 by all means. 

Wingman Wingman
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Got it bro, really appreciate your advice. 
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