Prepay Home Loan or Invest? Break-even Calculator
The same extra money either prepays your loan or goes into a monthly SIP. Find the return that investing must beat.
Enter your current rate. On a floating-rate loan this changes when your lender's benchmark changes.
On top of your EMI. In one case it prepays the loan, in the other it goes into a monthly SIP.
An assumption, not a forecast. Try a few values.
The break-even
Break-even annual return
9.1%
Investing the extra ₹10,000 a month beats prepaying only if your investments earn at least 9.1% a year before tax, on average, over the whole loan term.
At your assumed 12% return
Under these assumptions, investing ends ahead by ₹20,87,814.
| Result at the end of the original term | Prepay the loan | Invest the extra money |
|---|---|---|
| Loan ends after | 12 yr 11 mo | 20 yr |
| Total loan interest | ₹32,35,158 | ₹54,13,879 |
| Money put into the SIP | ₹45,78,721 | ₹24,00,000 |
| Tax on SIP gains | ₹3,33,114 | ₹9,70,642 |
| SIP value after tax | ₹69,33,023 | ₹90,20,837 |
| Total position | ₹69,33,023 | ₹90,20,837 |
How the comparison is kept fair
Both cases use exactly the same cash every month for the full original term: your EMI plus the extra amount. In the prepay case the extra amount goes into the loan, and once the loan is cleared early the whole freed-up payment goes into the SIP. In the invest case only the EMI goes to the loan and the extra amount goes into the SIP. Gains on the SIP are taxed as long-term equity gains using the rates on this site, assuming the yearly exemption is fully available. The interest tax saving, if you choose it, is added at its face value and not reinvested.
Prepaying saves interest with certainty; investment returns are uncertain and can be negative over any period. Prepaid money also cannot be taken back out of the loan, while an investment stays accessible.
This shows a trade-off under the assumptions you enter; it is not advice to prepay or to invest. Tax rules and your own situation may differ.
Rates and rules last verified on 03 Sep 2026.
How the Prepay-or-Invest Comparison Works
Every rupee you prepay earns a guaranteed return equal to your loan rate (before any tax effect), because it stops interest at that rate. Every rupee you invest earns an uncertain return that could be higher or lower. The break-even return is the average yearly return your investments must reach for investing to end up ahead, so you can judge how realistic that number looks for you.
To keep the comparison fair, both cases use the same cash every month for the whole original term. When you prepay, the loan closes early and the freed-up payment goes into the SIP, so the prepay case is not penalised for ending its EMIs sooner. SIP gains are taxed as long-term equity gains using the rates on this site.
The break-even sits above your loan rate because investment gains are taxed and returns are uncertain, while the interest saved is certain. If you claim the home loan interest deduction, interest costs you less after tax, which raises the bar for prepaying to win.
Break-even return = the annual SIP return at which (SIP value after tax + tax saved on interest) is the same in both casesFrequently asked questions
Is the break-even a prediction?
No. It is a hurdle: the return investing must clear. Whether you can reach it is the uncertain part, and returns can be negative over any period.
Why not just compare my loan rate with the expected return?
Because the SIP is taxed on its gains, the loan interest may earn a tax deduction, and the loan runs for years while a prepayment shortens it. The comparison puts all of that on one footing.
Can I take prepaid money back out?
No. Money prepaid into a loan cannot be withdrawn, while an investment generally stays accessible. That is a real difference even if the numbers come out close.