Interest-Free Home Loan Calculator
The SIP that offsets your loan interest - and what has to be true for it to work.
- What the SIP is worth
- Interest paid so far
“Offset the interest” sizes the SIP so the whole corpus equals the interest, leaving nothing over — the cheaper instalment. “Keep the capital” sizes it so the growth alone covers the interest, so everything you paid in survives; that needs a larger instalment. Interest is computed on a reducing balance from the amortisation schedule, and the SIP compounds monthly on the same convention the other calculators here use, so the figures agree across pages.
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Independent · No commissions · No fund-house data — how the numbers are computed
How it works
The idea is straightforward: run a monthly investment alongside your home loan EMI, sized so that by the time the loan ends the investment is worth what you paid in interest. On paper the interest has been cancelled out, and the strategy gets sold as an interest-free home loan.
This calculator solves for that monthly amount, in two versions. Offset the interest sizes the investment so the entire corpus equals the total interest — the cheaper instalment, leaving nothing over. Keep the capital sizes it so the growth alone covers the interest, which needs a larger instalment but leaves everything you contributed still yours at the end.
The arithmetic is exact. The premise is not. Everything here rests on the gap between an assumed investment return and the loan rate, held for twenty years, and nothing ring-fences the corpus against the loan. If returns disappoint you will have paid the interest in full and hold a smaller pot than the projection promised. Equity does not deliver a constant return; it delivers an average one, with long stretches below it, and the strategy needs the investment to survive every one of those stretches.
Set against simply prepaying the loan, it has two genuine advantages: the money stays liquid, and it stays yours. Set against it, prepaying is certain and this is not. When the expected return is at or below the loan rate the calculator says the target cannot be reached rather than printing an instalment that only looks affordable.
Required monthly investment = total loan interest / future value of 1 rupee a month over the tenureIn keep-the-capital mode the divisor is the growth part of that future value alone, which is why it asks for a larger instalment: the contributions themselves are not being spent on the interest.
Frequently asked questions
Can a home loan really be made interest free?
Not literally. The interest is paid to the lender in full either way. What the strategy does is build a separate pot intended to be worth roughly that interest by the end of the tenure, so the net position across both is closer to having borrowed at zero. That depends entirely on the investment delivering the assumed return over the full period, which is not guaranteed and is not contractual in the way the interest is.
Is this better than prepaying the home loan?
It is a different trade, not a strictly better one. Prepaying gives a certain, tax-free return equal to your loan rate and reduces risk. Investing alongside offers a higher expected return with real variance, keeps the money liquid, and leaves you holding an asset rather than a smaller liability. If the gap between your expected return and the loan rate is small, or you would struggle to keep the investment going through a bad market, prepaying is the sounder choice.
What return should I assume for this calculation?
Be conservative. Long-run Indian equity returns are often quoted at 12 to 14 per cent, but those are averages over favourable periods and your actual sequence matters enormously over a twenty-year loan. Running the number at 10 per cent and again at 8 shows how much of the result is the assumption rather than the plan, and a strategy that only works at 14 per cent is not a strategy.
What happens if I stop the investment partway through?
The projection collapses, and this is where the strategy usually fails in practice rather than in the spreadsheet. The corpus depends on every instalment compounding for the remaining years, so contributions missed early cost far more than the amount missed. The loan interest, meanwhile, carries on exactly as scheduled. If the combined monthly outflow is not comfortably affordable in a bad month, the plan is too large.
Go further
The EMI and the interest this strategy is trying to offset.
The same money compared on net worth, which is the fairer test.
The certain alternative: what prepaying actually saves.
Project the investment side on its own.