About home loan pre-payment calculator
Paying a lump sum towards your home loan reduces the outstanding principal, so you pay less interest. You can use the saving either to shorten the loan or to lower the EMI.
Two ways to use it
- Reduce the tenure: keep the EMI and finish the loan sooner. This saves the most interest.
- Reduce the EMI: keep the tenure and pay less each month, which helps cash flow.
Before you prepay
- Floating-rate home loans for individuals generally have no prepayment charge in India, but check your lender's terms.
- Keep an emergency fund. Do not prepay with money you may need soon.
- Compare the loan interest with what you might earn by investing instead.
A worked example
On a ₹40 lakh, 20-year loan at 8.5 percent, the balance after 5 years is about ₹35.25 lakh. Paying ₹5 lakh extra at that point and keeping the EMI the same would clear the loan about 44 months early, saving a large amount of interest.
