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# Free Home Loan Prepayment Calculator

We try to provide you the best loan calculator. What makes a loan calculators best for its users? A loan calculators utility is substantially enhanced by incorporating the functionality of prepayment. This blog not only offers a good home loan prepayment calculator but it also provides a researched, in-depth write-up.

This blog explains in detail the concept & benefits of home loan prepayment.

One can save large sums of money if prepayment is done timely. Hence this blog has been prepared with objective of making its readers more knowledgeable about the concept of loan prepayment.

Though the title talks about home loan prepayment, but the concept of prepayment can be used with any loan.

We strongly believe that home loan prepayment is the most effective tool available for common men which can eventually make them financially very stable.

When we developed this prepayment calculator in year 2013, only a handful websites used to offer prepayment calculator online. But now, almost all banks offer loan calculators with a prepayment option.

## Why use a prepayment calculator?

Prepayment calculators helps in estimation of potential savings. Exemplifications coupled with a great software makes this home loan calculator a rare find on internet.

Lets try to understand the utility of loan prepayments.

Lets take an example. Suppose one took home loan with tenure of 20 years. In this tenure total interest payable will be 1.4 times of principal (@10.5% p.a.). Means, if home loan is \$100,000, total interest payable will be \$140,000. Total payment to be made by the borrower will be \$100,000+\$140,000 = \$240,000.

So whats the problem, if we take loan we must pay the interest. Whats the big deal?

The big deal is in the interest burden.

One took loan of \$100,000. Repayment of these \$100,000 is not a problem. The problem is with the interest payment. In our example the interest payment was 1.4 times that of the loan amount.

All of \$140,000 that one pay as interest is EXTRA COST. We must do everything to reduce this extra cost burden.

So, it is important to understand this concept that we cannot take home loan and keep paying its EMI’s for year together just like that. It is in our interest to THINK and form a strategy of how we can reduce our interest burden.

If we can use use a good home loan prepayment calculator, we can plan to save huge amount of money in interest component of the loan.

Home loan prepayment calculator provided here can help us to both visualize the problem & save lots of money in interest.

## Home Loan Prepayment Calculator

 Home Loan Amount Interest Rate p.a. [In %] Loan Tenure [In Months] Pre-payment Amount Pre-payment Start Month [e.g. If pre-payment will start from 8th month then enter 8] Pre-payment Frequency Just OnceOnce every monthOnce in 3 monthsOnce in 6 monthsOnce in 12 months

Interest paid by the borrower is the profit for the banks. Banks would like us to continue paying interest till eternity.

It is in our benefit that we shall find ways to reduce OUR interest burden. And we can do it only if we get aware of our interest burden.

We are providing here an EMI calculator with home loan prepayment functionality enabled.

### Utility of home loan prepayment calculator

What this calculator does best is make people aware about the potential savings they can ensure with every dollar of prepayment.

But why I am so crazy about loan prepayments (some banks also call it part-payment of loan)?

The worse part of interest payments is that, even it we continue paying interest for next 100 years, the loan burden will not reduce even by one dollar.

#### It is important to realize that we must pay-off principal portion of loan as soon as possible.

There are two components of any loan. One part is principal & second part is interest. Till we pay-off principal, interest expense will continue to incur month after month.

We can continue to pay interest all our life, but loan will never finish. Without clearing principal component of loan, the loan never gets paid.

When we pay EMI, major portion of EMI is used to pay interest. Another portion is used to pay principal. As banks priority is to earn interest, they will never like you to prepay you loans.

But we must plan a way to pay more principal. How it is possible?

The solution lies in the prepayment of loans.

## Lets see an example…

Suppose one takes loan of Rs 100,000 for 5 years @ 15% per annum interest. His monthly EMI will be close to Rs 2,382. Total interest to be paid in 5 years is Rs 42,920. Total amount returnable to bank is Rs 100,000 + 42,920 in 5 years.

If he prepays the loan after 6th month itself, he paid just Rs 4,436 in interest (in place Rs 42,920). This is a huge saving.

Its true that clearing a 5 year loan in just 6 months is very difficult. But what is important to visualize here that what is the SAVING POTENTIAL.

If in a loan of one lakh Rupees, we can save approx. Rs.40,000, Imagine what will be the saving if loan amount is Rs.50 lakhs?

### Is there a right time to prepay home loans?

Purpose of home loan prepayment is to save the interest component. Interest load is maximum in initial months. Hence loan prepayments made in initial months saves the most amount of money.

The earlier we start home-loan-prepayment the better.

Interest burden is maximum in initial months. Interest then gradually falls in later months.

Lets visualize how interest & principal component of loan varies with time.

In initial years, principal component is maximum. Principal maximum means chargeable interest will be maximum. This is why in initial years, majority of our EMI is consumed to pay interest.

### Example of loan payment in initial years…

Suppose one took a home loan of Rs 30 Lakhs @ 10.5% for 20 years.

• In the first year sum of all EMI’s would be approx. Rs 2,10,000
• Out of this Rs 2,10,000 only Rs 26,600 will used to pay loan principal.
• Balance Rs 1,83,400 is used only to pay interest.

So how does LOW principal payment impact us?

Low principal payment means higher loan outstanding balance. High loan balance means higher interest to be paid in next EMI’s.

#### Already thinking how to reduce loan outstanding….?

If we pay only EMI, we have no possibility to save interest. By loan prepayment we can pay-off principal component faster. By making prepayment we pay additional sums of money above EMI.

Prepayment allows us to pay principal faster. Each payment made, in addition to scheduled EMI, goes as prepayment.

How effective are online home loan prepayment calculators?
These calculators helps us to visualize how much can we saved because of prepayment. This motivates people to practice loan prepayment.

On internet there are great loan prepayment calculators launched every day. It means people are becoming more aware about the concept of loan prepayment.

### How EMI’s on Home Loan is calculated?

The formula for EMI calculation is:

E = EMI
P = Principal
r = monthly rate of interest (Interest is 10.5% it means r = 10.5/12/100 =0.00875)
n = time in months

Example: home loan of Rs 30,00,000 at rate of 10.5% per annum for a period of 20 years (240 months). EMI will be:
E = 30,00,000 x 0.00875 x [(1+0.00875)^240 / {(1+0.00875)^240}-1} = Rs 29,951 per month for next 20 years.

#### Prepayment of home loan is always a better choice?

No not always.

There are cases when prepayment cannot take top priority.

If there are other opportunities that gives higher returns, then loan prepayment will take a second priority.

Confused? Let me explain…

How to decide if extra money in hand shall be used for prepaying loans or to be used elsewhere ? Here is a way out….

Rule says, pay your costlier debts first before making any investment. But what if you know that your investment is going to give you very high returns? In this case the call will be based on numbers…how?

Suppose you you are investing in an index funds, then probably your long term return will be close to 12% per annum (leave aside risk factors).

Compare this return with your home loan interest rate. If home loan interest rate is higher than 12%, then prepay your home loan first.

When home loan interest falls below 12%, even them home loan shall be paid?

In most cases, YES. Why?

The problem is, majority does not know how to handle investment (leave aside equity – index funds)?

My personal preference (for people like me and you) is home loan prepayment. Interest that we save on home loan is ASSURED. Once we make a prepayment, interest saving is assured.

But if the same money in used to buy index funds, are its returns assured? No. Expert investors may give YES as an answer here. But for common men, loan prepayment is a much better alternative.

Interest saving in tune of 10% per annum is phenomenal. At times, even stock market cannot assure such high returns in short term.

## Loan prepayment is common mans way to get rich

Home loan is the biggest-loan an average middle class avails in his life. As home loan amount is big, people often go for longer loan tenure like 20-25 years. In home loan, both loan amount & tenure is big. These two factors makes the interest burden huge.

For example, a home loan of Rs 30 lakhs, for 20 years at rate of 10.5% per annum, interest burden is Rs 42 lakhs. But when home loan of Rs 30 lakhs, is availed only for 15 years at rate of 10.5% per annum, interest burden is only Rs 27 lakhs. When home loan of Rs 30 lakhs, is availed only for 10 years at rate of 10.5% per annum, interest burden is only Rs 19 lakhs.

These type of permutations can be easily done using home loan prepayment calculators.

### A Calculation we shall never forget….

As a rule of thumb, a real estate property which yields rental income of 4% per annum is considered a good investment.
Property Value (our cost) = Rs 30 Lakhs
Rental Income in first year = Rs 10,000/month (Rs 120,000/year)
Rental Yield = 120,000/30,00,000 = 4%
But the yield of 4% will happen when we we buy property without taking loan. In this case our our cost is only Rs 30 lakhs.

In case of home loan scenario Rs 30 lakhs is not only our cost. Out total cost is Interest+Principal. Cost will be equal to Rs 30+41.5=71.5 Lakhs. In this case our rental yield will be much lower:
Property Cost (due to loan) = Rs 71 Lakhs
Rental Income in first year = Rs 10,000/month (Rs 120,000/year)
Rental Yield = 120,000/71,00,000 = 1.7%

#### Lets see how much interest we can save by making small prepayments

Lets take an example, home loan of say Rs 30,00,000 at rate of 10.5% per annum for a period of 20 years (240 months).

 SL EMI (Rs) Extra Payment as prepayment/ month (Rs) Total Interest Paid in Loan Tenure (Rs) Savings (Rs) Years for Loan to be 100% paid 1 29,951 0 41,88,335 0 20 2 29,951 500 39,23,348 2,64,968 19 3 29,951 1000 36,95,405 4,92,929 18.1 4 29,951 1500 34,96,554 6,91,781 17.3 5 29,951 2000 33,21,043 8,67,292 16.5 6 29,951 2500 31,64,653 10,23,681 15.8 7 29,951 3000 30,24,198 11,64,137 15.3 8 29,951 4000 27,81,503 14,06,833 14.3 9 29,951 5000 25,78,476 16,09,860 13.4 10 29,951 10,000 19,07,612 22,80,724 10.3

From this table you can see that, just by making extra payment of Rs 500/month we can save Rs 2.65 lakhs. By making extra payment of Rs 3,000 we can save as high as Rs 11 lakhs in totality. By making those extra payment we are paying nothing extra. We are just prepaying the home loan.

### How to plan for prepayment of home loan?

Not many of us has that surplus cash to make a substantial prepayment of home loan. But the difficult part is banks does not accept small amounts of money as prepayment. They want prepayment to be made in multiples of EMI. So if ones EMI is Rs30K, he/she can make prepayment of Rs 30K or its multiples. But making prepayment of Rs30K each month is very difficult. What is the solution?

A better strategy will be to start a parallel saving plan like Recurring deposit. Start a recurring deposit of Rs 3,000 and contribute it till next 10 months. In ten months one will have Rs 30,000 as savings. In the 11th month make the prepayment of Rs 30K. Even such small prepayments of Rs 3,000 per month will make huge long term saving of interest. Prepayment of home loan will also reduce the loan tenure. It means one can plan his/her next real estate investment. [See Tip 6 below]

Before starting of EMI payment towards home loan, always keep a note of two things:
(1) how much total interest you are paying against your loan &
(2) Break-up of principal and interest in each year of your loan payment. As shown in the above chart, interest payment in first few years are maximum and in later years principal portion gradually increases.

So if you are interested to get the dual benefits of prepayment (interest saving and term reduction), then extra payment shall shall start from first few months itself. If you are not making payment in initial years you are actually paying back majority of interest to bank without saving it. If you are making extra payment in later years you will only reduce the loan tenure. Interest saving will be negligible.

## Recap of what we learnt about Loan Prepayment

(1) If you would like to make prepayment of your home loan, then start making prepayment from first years itself. You will save heavily on interest the earlier you start.

(2) If you have costlier loans like credit card debt, personal loan etc, pay them first. Idea is to pay costlier debt first before making prepayments

(3) Make sure to declare the interest and principal component of your loan when you fill your income tax return. This can save you a lot on income tax.

(4) As per present directive of RBI, prepayment charges on home loan cannot be charged by any bank. So do not be fooled by banks if they give you discourage you to make prepayment of home loan.

(5) Your prepayment decision should not be delayed. One day a close friend of mine came and told me that he took a home loan of Rs 30 lakhs 4 years back and after paying 48 installments his outstanding principal is still Rs 27 lakhs. He was furious and he wanted to prepay the loan in order to reduce the principal. I immediately advised him to go ahead. If possible, one must start prepayment from the second month itself. We shall not wait for too long to start making prepayment.

(6) Plan to save money each month. Generally banks accept prepayment amount equivalent or multiple of your existing EMI. Put aside a fixed amount each month towards prepayment. When this accumulated savings is equivalent to one EMI, use them to make prepayment.

(7) Every year we get a pay hike. Decide to use 60% of your pay hike in making prepayment.

Take it from me the you will thank yourself thousand times after you have prepaid your home loan in full. Start now.

### Lowest Home Loan Interest Rates of Indian Banks

(Updated on August’2017)

Please note how interest burden is changing with changing loan tenure

 Minimum Floating Interest Rate % Processing Fees Max. Tenure EMI per Lakh for Max Tenure (Rs.) Interest Burden for Max Loan Tenure (Rs./Lakhs of Loan) HDFC Ltd 8.35% 0.50% 30 Years 758 172,991 Sundaram Home 8.35% 0.50% 20 Years 858 106,005 Axis Bank 8.35% 0.50% 30 Years 758 172,991 ICICI Bank 8.35% 0.50% 30 Years 758 172,991 Indiabulls 8.35% 0.50% 30 Years 758 172,991 SBI 8.35% 0.50% 30 Years 758 172,991 Bank of Baroda 8.35% 0.50% 30 Years 758 172,991 IDBI Bank 8.35% 0.50% 30 Years 758 172,991 DBS 8.40% Rs.10K 25 Years 798 139,550 Central Bank 8.40% 0.50% 30 Years 762 174,262 OBC 8.45% 0.50% 25 Years 802 140,558 Canara Bank 8.45% Max. Rs.10K 30 Years 765 175,534 Kotak Mahindra 8.50% 0% 20 Years 868 108,278 PNB HFL 8.50% 0.50% 30 Years 769 176,809 Dena Bank 8.55% 0.50% 30 Years 772 178,086 Bank of India 8.55% Max. Rs.20K 30 Years 772 178,086 Indian Overseas Bank 8.55% 0.53% 30 Years 772 178,086 Andhra Bank 8.75% 0.50% 30 Years 787 183,212 Bank of Maharashtra 8.75% - 30 Years 787 183,212 Tata Capital 8.75% - 30 Years 787 183,212 Jammu & Kashmir Bank 8.90% 0.25% 30 Years 797 187,078 DHFL 9% Max. Rs.20K 30 Years 805 189,664 South Indian Bank 9.10% Max. Rs.10K 30 Years 812 192,258 Yes Bank 9.35% 0.50% 25 Years 863 158,988 Federal Bank 9.57% Max. Rs.7.5K 30 Years 846 204,548 Dhanalakshmi Bank 9.85% 1.00% 20 Years 955 129,225 Tamilnad Mercantile Bank 10.10% 0.50% 30 Years 972 218,589 Karur Vysya 10.35% Max. Rs.12.5K 25 Years 933 180,047 GRUH Fin 10.67% 1.00% 30 Years 927 122,890

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Disclaimer: All blog posts of getmoneyrich.com are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyze all securities before investing in one.

##### Mani
I am a Blogger with a passion for investment education. I started blogging in 2007-08. Blogging didn’t happened to me as a coincidence, it was a conscious decision. The idea with which I started blogging still stands true. In my starting days my finances remained tight. I was reading heavily about how to manage finance. One day I got hold of a book which my father gifted me in 2003. It was stacked below my graduation books. It was a small-thin book with its cover named "Rich Dad Poor Dad".....more

#### 195 Commentson "Free Home Loan Prepayment Calculator"

1. I have a home loan of 1800000 intrest rate 9.40% for 120 months and emi is 23429.i only paid 5 months emi. I took loan from hdfc ,and want close the loan as fast as i can.i want prepay the loan and save intrest. i can pay an extra 5000 to 8000 month for prepayment . Please advaise me about prepayment
Thank u

• Yes, you can approach your bank and ask them to increase your monthly EMI. This will be a very good way to make prepayments.

2. I had taken a home loan of 1964000 from dhfl @ 11.75% interest for 30 yrs in june 2017. I want to finish off the loan in nxt year around May.
So i wanted to ask if i have to pay the whole interest of 30 yrs or onlu the principal amount at that time.?
Pls clear my doubt.

• You will have to pay only the Principal outstanding at that time.

4. Hi Mani,
Repayment calculator is not working.. any issue with browser or anything else ? can you please share any other link or excel ?

• Shailendra Singh | August 10, 2017 at 4:05 pm | Reply

Hello Mani,
I took aloan of 1334486/- from hdfc.My balance on 1.4.2017 is 1076010/-. Iam paying an EMI of 14937 per month @10.15% interest.Shold I return a consoidated amount of balance from savings and PF say 5lakhs.

• Hello Shailendra, it depends how you would like to finance your prepayment as per your convenience. But being debt free should always be one of our top most priority.

5. I took a home loan of Rs 22 Lakh @9.35% in nov 2016 for 20 years. Now interest rate dropped to 8.40%. Can i resettle my loan at lower rate of interest before 1 year of loan alloted. Secondly how should i make repayment in order to make max saving. I want to finish my loan in 6-7 years. Currently i am paying EMI of Rs 23500. Will bank charge any penalty if i prepay my loan

6. Narayana Murthy | May 19, 2017 at 5:44 pm | Reply

Hi Mani,
Please advice me on my case. Currently I hold SBI -Max gain Housing loan . Current outstanding is 17.76 Lcs. I am paying EMI : Rs 37,036 ,I have got set in the Bank even though its more than the calculated EMI. Also I am trying to push 20K every alternate months.I have a chance to pull Rs 2 Lcs from PPF and push it to Home loan . My Current Home loan interest is @ 9.35% basic point. and PPF earning 8.65 %. let me know is it benefits me doing this,If so How much ( PPF Earning V/s Interest saving in Home laon)

• Hello, paying off your outstanding from PPF looks a decent choice. Go ahead with it.

7. Can you add change of ROI also in this calculator

8. What an excellent article! It is written and explained in such a simple language that the layman will have no difficulty in understanding it.

I count this as a Social Service done by Mr. Mani, educating the masses on such important topic which otherwise is so difficult to understand.

Keep up the Good work Mr. Mani. I purchased your Home Loan Pre-payment Calculate Sheet and it is excellent. I have put in the Numbers and all the details are plotted automatically. Now i can take better decision on how much more pre-payment i can make in order to reduce my overall interest outgo.

Regards,
Amit

• Thanks a ton Amit.

9. Thanks for the informative article.

I have a question regarding the prepayment. How would it differ if we prepaid some amount monthly to a bulk amount yearly. What is the effect if we ask the bank to change the emi to old emi+ prepayment amount.

If we are planning to prepay monthly, we are actually diverting the funds from our savings. Considering the future value of the prepayment amount, is it wise to prepay. We are paying an installment ahead of 20 years.

• old emi+ prepayment (some extra amount each month) is a better option. Approach your bank and ask them to increase the EMI. The increased amount will automatically be treated as prepayment.

10. Hi,

When I tried to put big prepayment amount on calculator it shows a message saying “this much amount is not allowed”. can you share if there is a maximum limit of prepayment?

• Yes there is a limit on prepayment amount (Rs.400,000). Try equal monthly prepayments in case the prepayment amount is bigger.

11. Sir I took 539520/+- car loan from icici bank@ 9.25% for five year, now after paying 12 installment can I pay remaining full amount by cash/ cheque then what will be the interest rate sir.

12. Good evening sir,

My name is vivek i am belong to middle class family.
Here just i want to know that I taken a loan Rs.1675000 in month of Dec 2017 for 17 years and my monthly installment is 17650 with interest rate of 10.50% so how can i complete my loan amount in 8 to 9 years???
And also tell me what is a prepayment option and how can i start with bank????
My capacity to extra pay with loan is 2000 means loan installment is 17650+2000….

So pls sir brief me asap…

13. Go great I get profited upto 20,000 Thanks

14. WoW.. Need calculator for Interest % Reduction (like Paying a fee to reduce Interest Rate in Housing Finance Institute) And its timing (like difference b/w conversion % versus remaining Principal)

15. OMG!!! I have never seen such an informative blog. I mean you get everything here.
i really appreciate your efforts in making this blog so amazing.
Thank you so much.
All the best.

16. Abhilash Nanda | October 18, 2016 at 3:11 pm | Reply

Thanks for the excellent information, may i get an advise on my housing loan . Central bank of india approved my housing loan for 40 lakhs ( Nov.2015 and i took 25 lakhs up to now and i decided do not take any further amount from approved amount . I started repayment from December 2015 onwards every month @ 43000 INR . my question is tenure period bank earlier decided as 300 months, i would like to decrease the period as 180 months . May i know the procedure of reducing tenure .Any fee is applicable or any part payment is required or any part payment is required.
Regards
Abhilash

17. Excellent article. But the more we reduce the principal amount, the interest tax benefit which is 2L apart from 1.5L 80C, will reduce and we pay more tax.

18. I have taken loan of 1066000/- in ser 2012,
Till now approx 5,75,000 paid as EMI(aprx 48 emi)
Now before 49 the EMI i have pre paied 5,50,000/-.
SO What shud I do , either increase EMI of REduce it,
Is is benificial to decrease emi a

• After making the prepayment reduce the tenure. If possible you can also increase the EMI

19. Great information…..explained very nicely..thank u

20. Sherlene Robinette | August 19, 2016 at 10:10 pm | Reply

Useful info. Fortunate me I discovered your site by accident, and I am surprised why this coincidence did not took place earlier! I bookmarked it.

21. Really great article!
I just have one concern, how accurate is thwe loann calculating method mentioned?
Does it provide the indicative emi or the exact emi if the interest rate is pre-determined?

22. Hi Sir,
This is article is very great and provides excellent information to all house loan people. Very informative and helpful.Thanking you very much for this article.

23. Thank you so much sir for such a useful article to the people who wish to have a home loan.

Dear sir,
I would like to clarify my doubts as my husbands salary is been deducted of RS.6000 under IT every month. So for tax exemption we are planning to take a home loan of RS. 25 Lakhs for 10 years and pls guide me what is the minimum tenure to take the loan.
So, I request you to suggest me whether should I take for low/high tenure. In case if I go with low tenure I will be able to save interest but will not be able to claim under tax exemption and also I am able to prepay rs.10 Lakhs after 20 months will it will be useful to do. Pls confirm me whether will bank people will provide me the break ups every month I.e, principal/interest paid,leftover principle/interest amount paid/remaining tenure.
I would request you to reply me back as soon as possible.
Bye sir.

24. Excellent!!!!
very very useful for one and all as it is to the point.
Take away is repay housing loan as early as possible.
Regards
Dorepally Girish

25. Dorepally Girish | July 19, 2016 at 3:54 pm | Reply

Excellent article!!!!

Simple and to the point. Take away is better to conclude the housing loan as soon as possible.

Regards
Dorepally Girish

26. Vishnu Prasath | July 11, 2016 at 10:58 pm | Reply

Small Correction is formula:-
u r using this formula:-
Total Saving = Per Payment (Loan Amount Paid + Total Interest Paid after Pre-payment) – Normal Payment(Loan Amount Paid + Total Interest Paid)

Y not this Formula:-
Total Saving = Per Payment (Loan Amount Paid + Total Interest Paid after Pre-payment) – Normal Payment(Loan Amount Paid + Total Interest Paid) – Total Pre-payment Done

27. Vishnu Prasath | July 11, 2016 at 10:52 pm | Reply

Hi really great effort..only one doubt.. when you calculated the total saving for per payment. why your not adding the Total Pre-payment Done also. your only considering the TOTAL SAVING = (Total Pre-payment Done+Total Interest Paid after Pre-payment) – Total Amount Paid With Per Payment..

28. hi!
Thanks for this great article. no one has cleared my doubt so well ever.
however, I have one question, probably the simplest one, as I am new to taking care of finances completely on my own. When you say prepay the loan, say I want to put 18036/- every 3 month as prepayment as this is my EMI.( I have a home loan of 18 lac. tenure 20 years,started 2011). So where do I put the money , I have to go to bank and deposit or the OD account is for prepayment online.

• OD account is only with SBI.
For other backs one needs to physically go to Bank and deposit the amount.
Online prepayments are not not allowed by any banks (till now…)

I have SBI maxgain, in which it gives OD option.
So Just to be clear.
I can transfer online in OD account each month an amount equivalent to my EMI( which 18036/-), and when the amount is equivalent to loan amount left( by your above calculator, it should get paid in 5 years, taking months starting after 48 months), I can personally visit and ask bank to close my loan amount. right..?
Also wanted to let you know , that your article inspired me to take a step towards it. and deposited my first amount in OD account online.
Thanks Again.

29. Excellent post, very informative, I just paid some amount towards the home loan prepayment and saved lot many EMIs thanks a lot.

30. Dear Sir,

I never read this kind of detailed and excellent article earlier. You clarified all my doubts particularly in Prepayment methods.

Thanks a lot.

Regards
Girish

• I am glad that the article cleared your doubts related to prepayments.

31. Aditya Reddy | April 7, 2016 at 5:30 pm | Reply

HI Mani,

We are planning to avail housing loan of 55,00,000, with my brother as co-applicant.So in this case how we both can declare our principle and interest amount for IT savings every year.

Also, planning to opt to 30 years tenure as the EMI would be less. But we are planning to pay 20 lakhs in 48th Month. Is this 20 lakhs amount would be subtracted from the outstanding principle amount ?.

Can you please help me in terms of how much interest amount we are going to save on total if we pay 20 lakhs in 48th month.

Considering above information. is it benefit to opt 25 years or 20 years tenure. Please help me with the calculations.

Regards
V.Reddy

• It is always beneficial to go for lower terms.

CASE 1: LOAN 55,00,000, INTEREST 9.6%, TERM 20 YEARS (EMI = Rs. 51,627)
TOTAL INTEREST PAYABLE (00L PREPAYMENT IN 48TH MONTH) = Rs. 68,90,457
TOTAL INTEREST PAYABLE (20L PREPAYMENT IN 48TH MONTH) = Rs. 31,34,837
SAVINGS = Rs. 37,55,620

CASE 2: LOAN 55,00,000, INTEREST 9.6%, TERM 25 YEARS (EMI = Rs. 48,436)
TOTAL INTEREST PAYABLE (00L PREPAYMENT IN 48TH MONTH) = Rs. 90,30,858
TOTAL INTEREST PAYABLE (20L PREPAYMENT IN 48TH MONTH) = Rs. 34,84,891
SAVINGS = Rs. 55,45,966

CASE 3: LOAN 55,00,000, INTEREST 9.6%, TERM 30 YEARS (EMI = Rs. 46,649)
TOTAL INTEREST PAYABLE (00L PREPAYMENT IN 48TH MONTH) = Rs. 1,12,93,567
TOTAL INTEREST PAYABLE (20L PREPAYMENT IN 48TH MONTH) = Rs. 37,31,702
SAVINGS = Rs. 75,61,865

• Aditya Reddy | April 17, 2016 at 9:31 am | Reply

Thanks, Mani.

Do we need to pay any penalty if we do pre-payment?. heard that banks used to impose 2-3 % earlier but that has been ruled out by RBI..Is that correct. Please help

Regards
Reddy.V

32. arwind sharma | April 2, 2016 at 12:51 pm | Reply

Thanks for the information

33. This is one of the excellent and detailed articles I ever gone through on the net.

Kudos to the author. Thanks a ton.

34. hi sir,
i book flat in no emi till procession scheme, procession will be in june 2018 . My property value is 23 lakh. i want to reduce my interest budget as much as possible. emi will start from july 2018, that time i am able to pay around 10-12 lakhs, what i do so it will easy for my that time to pay less interest cost.
thanks

• Just try to prepay money towards principal instead of reducing monthly EMI.
Start prepayment at early stages of loan.

Nothing is too late, I am planning to start the prepayment from next month.

Thank a lot for sharing this!

• You are right. Realization of a potential opportunity is also a gain.

36. if we take loan of says 5 lakh for 5 years tenure and after two years i start paying more emi eg if old emi was 10,000 and after two years we start paying 12,000 ,
so will it reduce total interest ?,
2nd will it reduce total tenure period ?

• Yes increasing EMI will reduce interest burden and will also reduce tenure

37. Is there a thumbs up button or vote up.. this article deserves thousands up vote. Great information provided.

38. Hi,

Very nice article, but want your help to unserstand my EMi calculation.

I have a load for 31lacs with 10.10% interest rate for 20 years.

Already I completed 2 years for emi and now If I plan for another 10000/month repayment what benifits will I get.

Thanks

39. Very good article…Informative and useful..Thank you!!

• Thanks Reshmi for the appreciation

40. Thanks for the great article!!! Bookmarking it 🙂

• Thanks Anubhav

41. Gunwant Lokhande | January 31, 2016 at 4:57 pm | Reply

I have a laon for 18 lacs wiht 10.15% interest and 180 months . if i make payment for 4 lacs now how much amount i can save

• Hello Lokhande, you can save approx. Rs 9 lakhs in interest

42. hii
my question is that along with teh equated prepayment..which is a better optoin
1> to increase the emi value?
2> to reduce the number of ears accordingly?
3> or keep the same

• Increasing EMI value will automatically reduce the tenure. This way of prepayment is very effective

43. MOSIBUR RAHAMAN | January 23, 2016 at 6:14 pm | Reply

Really excellent article on loan prepayment which I was desperately searching from my finance friends & also internet but could not get the correct picture. Thanks a lot. This should be viewed by all the people having home loan.
Please keep on educating us on daily important financial matters like these. Please keep up the good job going!

44. Dear Sir,
I have taken home loan of 16.50Lacks for 20 yrs & emi is 15435/-. I also have taken gold loan of 1.80 lacs at interest rate of 13% per annum. i will have 10K balance in every month
I have a question that should I pay only interest of gold loan i.e. around 2K & prepay balance 8K to home loan account? OR
Should i clear my gold loan first?

45. Valuable info. Lucky me I found your web site by accident, and I’m stunned why this twist of fate did not happened in advance! I bookmarked it.
Best website i found, got everything i was looking for. I will recommend to my friends via twitter , Facebook and whats app

46. I had taken a loan in 2009 for an amount of 14 lacs and for 15 years at 10% from SBI. The prepayment idea stuck me only a couple of weeks ago and i have been researching about it. I am currently paying 15050/- a month and have paid for the last 77 months.

I am in a position to increase the EMI or pay a lump sum amount to reduce the tenure. I have the following 2 questions:

1) I can easily go upto 40k-45k a month. How much benefit will it give me? in terms of reducing the interest and the loan tenure?
2) The tax saving which i get now for the interest paid – I understand it will be much less than the saving on interest. Am i right?

47. I have taken sbi maxgain home loan of 2040000 in Oct 3013 my monthly emi is rs 22794 my book balance is 1865000 and available balance is 26000. i pay some amount to loan account but that amount is not directly deducted from principal but this amount should be added to available balance. I want to reduce to total period in 8 years. how much amount should I pay everymonth plz guide

48. Payday 360 Loan | November 6, 2015 at 6:59 am | Reply

Valuable info. Lucky me I found your web site by accident, and I’m stunned why this twist of
fate did not happened in advance! I bookmarked it.

49. I have taken 2040000 home loan sbi maxgain for 15 years,the emiis 22794.The loan istaken in Oct 2013. Now from Jan 2016 I want to repay 6000 evry month .Is the period of my loan is reduced upto how may months plz infrom

• I have taken 20 40000 from sbimax gain yuva loan in in Oct 13 for 15 years my emi is 22794 . From Jan 16 I want to pay 6000 per month is my period reduced plz guide me

• Sure Vaibhav, by paying Rs 6000/month extra your loan tenure/period will be substantially reduce.

50. Hi,
I was browsing over various articles regarding home loans and prepayments when I found this one. A good read indeed.

I had taken a home loan of 17 lakhs for a tenure of 20 years using SBI Max gain scheme about 10 months ago. And my monthly EMI comes upto 16421/-. I recieved some funds of around 4-5 lakhs during past few weeks. Should I consider investing or pre-payment of my home loan?

51. Hello,
Thanks for the article. Indeed homebuying and paying loan for it is one on the biggest financial decisions we make in our life. I have a similar question.
I have a loan of 25L, which i took 4 years back, i had put around 5L two years after having the loan in my OD Account(SBI Maxgain) and never touched it. My book balance is -(17-18L). If I have sufficient money should I prepay the loan completely or a part of it(making payment to principal amt) upto 70%. I am not too keen now on the tax saving(Principal or Int, or via FD) as I will be out of India for an year or 2.

• Hello Akshay, closing the loan will be a better idea.

52. Hello Dear,

Thanks for knowledge sharing:)on Money..
my qu is – I had borrowed home loan of 38 lacs under SBI MAX GAIN Scheme on Jan 2013. currently my EMI is 37,429 INR @ 9.80 % interest, I have paid 1,40,344 INR towards Principal amount till date. my current Book Balance is (- 35,57,586.00 INR ) , Drawing power is 36,98,458 INR & available balance is 1,40,872 INR.

Can you please suggest me whether i should increase my EMI to 42000 or should i pay this extra money ( 4,000 per month always) in OD account as this is a SBI MAX GAIn Account , instead of increasing my EMI. waiting for your suggestion.

Thanks
Amit G

• Use of Max Gain A/c is best. But problem is we deposit money today in max gain a/c and spend it tomorrow. If you are sure that you will not utilize money deposited in max gain account (until some extreme emergency strikes) go for it. Other wise increasing monthly EMI is second best option.

53. Excellent calculation, but against all your calculation, even if I consider much lower return on FD it earns me more then prepayment benefit.

Let me illustrate with an example :
Loan Amount – 20L
Tenure – 20 Yrs
Interest – 9.8%
EMI – 20305
Total Interest payment- Rs.1934309
Total Capital Payment – Rs.2938891
Total Payment – Rs.4873200

Let’s say I prepay 500000 in first month only, then

Total Interest payment becomes – Rs.808185
Total Capital payment – Rs.1500000
Total Payment – (1500000+808185+500000) = Rs.2808185

Excess paid = 4873200-2808185 = 2065014

Now if I invest Rs.500000 in a bank fd@8% its value after 20 years becomes Rs.2330000

If I keep away all the tax benefits on home loan and taxability of FD considering in a nil tax bracket, subject to assumption made it is beneficial to invest then to prepay loan.

• You are right.

Let me give one very similar example:

Property Value: 25Lakhs
Loan Amount – 20Lakhs
Tenure – 20 Yrs
Interest – 9.8%
EMI – 19036

Prepayment:Zero
Total Interest payment- Rs.25,68,680

Prepayment: Rs.400,000 in first month
Total Interest payment- Rs.11,24,590

Interest Saved due to prepayment of Rs 400,000:
Rs 25,68,680 – Rs 11,24,590 = Rs 14,44,090

If same Rs 400,000 kept in FD for 20years @8%, appreciated value will be 18,64,383
This difference happens as loan interest is calulated on “reducing balance method”.
http://www.getmoneyrich.com/reducing-balance-method-interest-calculation/

During the loan tenure of 20 years, the capital appreciation of property will also happen.
In our example, property value at start was Rs 25Lakhs
At rate of @7.5% per annum, property value after 20th year will be close of Rs.1.0 Crore

Regarding FD, it is point worth noting that no bank in India will offer @8% interest when holding tenure is 20 years. Interest offered will be close to 6-6.5%. Moreover gain in FD is also taxble, so this will further reduce the net gain.

While interest and the principal paid on home loan saves tax.

Conclusion: Do it for saving or investment, if one has extra money, using it to make prepayment of home loan will be much wiser decision than keeping it locked in Bank FD.

54. Hi, I have taken home loan of 30L in 2013 for 20 years tenure, in the last 2 years I have regularly paid emi of 29K and also made pre-payment of 5L, today my outstanding is 23L approx with 11 years tenure remaining. I know pre-payment during initial stage of loan is more useful but where is the cut off that I should stop making pre-payment and better invest on other tools as the interest portion at that cut off time will be lesser. Is there any thumb rule of no. of years of loan after which pre-payment is not good option?

• Prepayment in initial years saves more interest (lump sum value).
Prepayment in later years saves less money (lump sum value).
But in both the stage (initial or later) the savings will be @10% (or equivalent interest rate).

55. Loans in India | September 8, 2015 at 4:05 pm | Reply

Thank you for the information you are persuading for us.It seems helpful to me and it will be glad to me to implement it.

56. Thanks for the article

I have taken a 25L Home loan from BankOfBaroda with interest rate 10% for 15yeras ..expected EMI is around 27K.. where I prepared and ready to pay 27K per month(which I can bare )….. so that …..total amount paid by will be 48Laks in 15 yeras

However Bank Manager increased the tenure years to 30years and reduced the EMI to around 23K and directly/indirectly forcing me to pay it for 30yeas. (so that …total amount paid by will be 78Laks in 30 yeras).

When I asked Manager/staff to decrease the tenure to 15years then they suggesting me to pay 27L per month so that extra amount considered as pre-payment(extra 4K) and automatically principal will be decreased

Are they playing any trick here ….. should I stick to 15years tenure or 30 years with EMI : 27K (23+4) is fine ?

• It will be better to keep tenure to 15 years

57. Hi,
I have take 1350000 Lacks Loan my Intrest rates is 10.5% for 20 year, I pass the 8 month now i want to Pre Pay around 4Lacks. So let me know its correct or not? and which thing i need to take care from BANK? and which thing i need to reduce Tenure month or EMI? So please All expert give me Right suggestion and give me attention which i need to take care from bank… Please

• By Bank, you will be asked to deposit cheque in favor to your home loan a/c number.
Specific details will be provided by your bank.
Go for the reduction of tenure.
Don’t worry its a simple procedure…

58. Mabel Almeida | July 26, 2015 at 9:46 am | Reply

Hi Manish,

I have taken a home loan of Rs. 16567500 in April 2015 from SCB at 10.1 reducing balance at emi of Rs. 179,050 for 15 years . My present outstanding is Rs 16324801 I will be doing a part payment of Rs. 50 lacs. I was informed by a bank rep that are 2 options with this part payment.
1. Decrease in EMI or
2. Decrease in Tenure

Which is the best option? How do you go about the calculations and how much interest can I save as per the options.

Thank you

• Go for the decrease in tenure.
You will save a minimum of Rs.80L in interest

59. Hi manish really nice article, & nicely explain. thanks

I found this article useful for home loan prepayment. It will give exact idea of saving on per payment.

60. Excellent information regarding home loan.
Usually banks dont share these kind of information in detail.

Thanks.

61. Took loan of 30 lac for 20 years. At present baleance prinicpal amount is 28 lac with remaining 212 months. If i do prepayment of 15 lac at one shot. How much it will benifit for me

62. Abhijeet Joshi | June 18, 2015 at 9:04 am | Reply

Hi,
I want to shift my loan to other bank but my co-operative housing society denies to issue NOC in bank format. Every bank has its own format that comprises of different clauses which are not agreed by society. Neither bank nor society talks about a compromise.In this case what can I do?

63. Siddharth Mehta | June 15, 2015 at 12:31 pm | Reply

I have remaining principle of about 22 lacks and EMI around 37000 and rate 10.05 and pending tenure is 79 months,
Which one better option?
1. Increase EMI by 10000 or – Whether this will directly reduce principle?
2. Prepay 10000 monthly or 120000 yearly

• Increasing EMI by 10K will directly reduce principal.

64. Very useful article.

65. Friend, you have not taken into account the income tax benefits for home loan repayments. In beneficiaries who are eligible for this, in their case tax saved can reduce the net saving shown.

• My friend this is the trick that’s played on us.
Idea is to create long term wealth.
For that loans needs to prepaid as early as possible.
Just to save tax we cannot keep self burdened with loan.

66. Home loans in India | June 3, 2015 at 7:10 am | Reply

I think home loans payment calculation is really complicated without home loan calculator. Thanks for the information it’s a full information about loans problem.

67. rakesh shrivastava | May 5, 2015 at 7:24 am | Reply

Dear Sir, I would liek to have a calculator wherein i can calcualte or plan to prepay the loan amount for upcoming years (different amount)..right now in your calculator, prepayment facility is eighter monthly, quaterly six month etc..i want to make prepayment at random frequencies…e.g. 2 laks in oct-15, 2.5 laks in dec-15 etc.Please advise for calculation

68. Fantastic Article….

69. Srinivasulu T | April 22, 2015 at 1:22 pm | Reply

It is very helpful to the people even they dont know what exactly internally home loan is going on.It is very help ful to the people who are taken already home loan or ready to take home loan.

70. hai

Thanks a lot. I get a best knowledge by your article.

71. Hi sir, Myself Sukanya. I am an Civil engineer by profession. My annual salary is around 8,75,000 INR. I am thinking to buy an House in Mumbai which costs around 1.5 Cr approximately. Which bank will be the best and EMI which suits to my situation. I am thinking to apply for loan of around 50-60 lakhs.

72. Pankaj Singh | March 12, 2015 at 1:10 pm | Reply

Great work sir, I wanted one advice from you. I am an NRI person and thinking to settle in India in next 2-3 months. For that reason I’m thinking to apply for home loan. Which are the mandatory documents to apply for home loan in India.

73. MY current EMI is 34000 for 15 year loan of 30Lac Rs.. I cannot make part payment now. If I pay 37000 EMI instead of 34000. IS that going to make huge difference?.

• Rs.3000 extra per month will be very good.
This is almost equivalent to 1 EMI per year.

74. Loan amount 8 L: EMI 10273: Tenure 15 Yrs ROI – 11.5%. Can I get EMI reduced instead of tenure and by how much. Loan start March 2013. Outstanding 7.6 L

75. Very Useful Article.. 🙂
Awesome presentation..
Thanks for helping people growing Rich!! 🙂

76. I took loan from GIC housing Finance Limited for a period of 20 years with the loan amount of 18 lakhs in 2009. Over the years i have done pre-payments and reduced my home loan to 6 lakhs now. The problem is that i realized that my Home Loan percentage in GIC is way higher than the other banks. In GIC it is 12.50% as the interest rate. Now i am in a dilemma weather to opt for home loan transfer to another bank, since my existing loan amount has reduced to 6 lakhs now. Will it make sense to do the transfer to another bank? Also i am not going to prepay for the next 1 year as i am planning to buy a car this year with my savings and a little bit of car loan. Please suggest me if i can do home loan transfer and also if i do the same, how much will i save? or should i continue with the existing GIC home loan with 12.50%. Also what are the miscellaneous fees if i need to pay like processing fee, admin fee(approx) when i do home loan transfer. Thanks a lot for the help in my decision making.

• I was waiting for the answer/suggestion 🙁

77. I have taken home loan of amount 1300000 in Jan 2012 from lic with 10.95% fixed rate. My present outstanding is Rs 11,96,000 as I have done part prepayment of 81000 this month. I came to know that there are 2 options with this part payment.
1. Decrease in EMI and
2. Decrease in Tenure
Can I select the required option on my own? Or is it by default? If default, can u tell me the process.

• correction…
I have taken home loan of amount 1300000 in Jan 2013 for 25 years

• You can I select the required option on my own

78. I have taken a Home Loan of amount Rs 30,00,000 in Jan 2010. My present outstanding is Rs 20,00,000. If I go for full closure. What amount I need to pay to the bank?

• Rs 20Lakhs Only

79. Sorry, just one correction. i took loan in January 2013.

80. Hello Sir, I took a home loan of 20 lakh 60 k in 2012 Jaunary. After making a few prepayments my home loan has come up to 11 lakh 50k. I’m currently paying 20k emi and have tenure of around 79 months and roi is 10.5 . Sir, i’m planning to do few more payments in coming months 1 lakh in January and 2.5 lakhs in April, 2015 when I’ll get my bonus and all. Sir, please let me know how much my tenure will reduce after these payments?

Sir, I’ve one more question. Sir, I want to invest in one more property in Kalyan, Mumbai worth 30-32 lakhs. So, after April 2015 should I use my next savings for down-payment of my second property or should i focus on finishing my current loan? It would take me around 1.5- 2yrs to save for downpayment. Considering property pricing getting high day by day in Mumbai I want to buy my second property as soon as possible.

Sir, I would like to mention that I get 48k from my company to pay for home loan interest every year.

Please sir, help me get out of this dilemma, i’m a newbie to all these things. I’ve followed whatever you’ve suggested in your article till now and want your help in this big decision. Thanks

81. I wish to one thing from you, If I am wrong please suggest me in this special case. Actually I get Home Loan @ 30,00,000/- as per my requirement. But Unfortunately I am received a letter for 31,27,000/- for loan sanction amount. After that I approached the Bank Officials for Breakup. They explained me, that additional amount 1,27,000/- is for Insurance.

My greatest doubt is

1. why the bank is taken 1,27,000 as a Insurance?
2. We are in a financial burden, why we need to take as a additional Burden as 1,27,000 for the 15 years?
3. If we are going to settle the Amount in 1 or 2 years to the Bank. wish to know is the Bank will reduce this amount?

• This is a trick played by most banks.
Property insurance is a must for all property.
But they also add Life Insurance to it.
I think this is why your value is as high as Rs 1.27 lakhs?

While signing the loan documents Bank should have explained you the charges.
But I suppose you missed that chance.
The only option now I think is to make a prepayment and ask bank to reduce the EMI

82. Can you please discard the prepayment amount limit of 4,00,000 as there is no such rule now applied? I want to use it for calculations but for amount more than 4,00,000

83. I have a purchase car on loan i.e 3,00,000 on 10.5% interest, my monthly emi is 6500. i want prepayment up 30,000 so i have save how many rupees or emi pl.give repaly

84. Hi, your post is very much precise and useful to the core that I have not looked further in other Google search results on this subject. Great work.

85. Very good article .Thank God such people are still around ,who can help others by sharing their knowledge

86. TATA CHANDRA SEKHAR | August 5, 2014 at 7:52 am | Reply

i have housing loan balance is 270000 with fixed intrest rate of 8% with ICICI bank. only 20 EMI are pending…Shall I go for pre closure of this home loan…Please suggest

87. Excellent narration… good information.

1)I took home loan for 38,50,000 for 20yrs of 10.15 from SBI,EMI is 37400 and with the given calculator if i pay 6000 per month right after 2nd EMI it reduces the tenure from 20yrs to 19.11yrs ie 1 month or 1 EMI
is it the right calculation? and correct way of doing prepayment? ie paying 6000/- per month will reduce 1 month of tenure.

2) prepaying the money in smaller chunks like 6000/- besides EMI will be best one or pool the money and pay at one shot is the best one?

88. Hi Sir, calculator is not working now?

• I fixed it.

89. Hi sir,I m vignesh,I have taken a loan of 22,25,000 with ROI of 10.5 for 15years.I have paid pre-EMI for last 18 months and EMI is going to start from next month.I have planned to make repayment of 3,00,000 lakhs every month.My query is whether i can go for lower interest or lower duration which is best..

90. Hi I am Praveen, I have taken a loan of 2150000 with an ROI of 10.75 with 3 years fixed and est is floating for a tenure of 25years. My query is if i pay an amount of 21000 every year starting from 32nd month, how my loan tenure will be reduced and how many months it will be reduced.

91. Hello sir, taken a loan of 13 lakhs for 180 months with an EMI of 14169 per month and wanted to reduce by paying an amount of 7 lakhs after 6 months as per the banks rules taken from Union Bank of India with an interest rate of 10.25% as housing loan. Please help to what extent the months will come down from a total of 180 months i.e. 15 years.

92. Hi Manish;
I have a Home loan of 33 Lacs which I took in the month of Feb 2013. with the EMI 33,432 @10.70 interest rate for tenure of 20 years (240months);
Now i am planning to pay 167160 /- in the month of dec i.e. 21st month after the loan got sanctioned.
please let me know- how much saving i would have on the interest and on the loan tenure.

regards

• Hi Vivek, You can use the calculator we have designed to get the answer.
Anyways by paying Rs 167,160 in 21st month you will save Rs 853,951

93. Balakrishna | July 8, 2014 at 6:50 am | Reply

An truly excellent article on Loan prepayment mainly because it is supported with realistic data and working figures.The number of responses and queries Manish has received itself is an indicator that it has struck the right cord among several readers.
Bala

94. Ramesh lkumar | June 29, 2014 at 11:42 am | Reply

A very nice article .

95. Hi Manish, Thanks a lot for the very informative article. I have a question. I have taken a homeloan in Aug’09 for INR 17.5 L. I made some part payment and also the interest rate has increased multiple times and i have also reduced it by increasing the spread. changed. My current EMI is 17187 and i have 148 months left. Current interest rate is 10.5%. If i make a partial payment of INR 4.5L, how much will be be my tenure/EMI (if there is no change in the other). Thanks.

• What is your loan balance today? Thanks

96. Hello Sir, very informative….
Wanted to know while taking loan whether to opt for long term or short term, if I wil eventually do the prepayment. please suggest…..Long term will reduce my emi so that I can save for prepayment & short term i may not be able to save mney…

• Ideally loan term shall be as low as possible.
At this stage you shall not concentrate on prepayment.
I will suggest you do your ‘capacity analysis’ first. Know your capacity to pay EMI.
Fixing loan tenure will then happen automatically.

97. Hello, I Have a query. I have taken home loan of 18lakhs in the year 2010 with a 20 years tenure. I now have 8.5 lakhs pending and remaining amount I have either paid thru prepayment and EMI. Now my question is this :
I have decided to prepay some more now and I want to know is it worth to prepay or to invest that money in RD. I have 2 lakhs which I am planning to pay off to home loan or towards investing in RD. Which one do you suggest considering the amount of home loan which is pending to be paid.

• Hi Ben.
I must say that you have done well in prepayment.
Without prepayment your home loan balance (now) should have been approx Rs 16.5 Lakhs.
But you said it is only Rs8.5 Lakhs.

A Fixed Deposit can give you returns of maximum 9% per annum.
If you prepay home loan using Rs 2lakhs, it will save you interest of 10.5% per annum.

If your investment generates returns above 10.5% then it is worth considering.
But return of Fixed Deposit is low.
Moreover returns of FD is also taxable.

So my suggestion will be to go for prepayment.

• Thank you soo much Manish for the valuable suggestion. Really appreciate it!! Yes it makes sense to prepay than to go for FD. My concern was this. If i continue to prepay and finish off/diminish my home loan, my taxable income would be more and instead i was thinking of alternatives like investing the money in Recurring Deposit or another thought process is that to invest some interior place in a land and will that land appreciate its value of more than 12% per year and in that way i can also benefit from tax thru home loan and also the land value will appreciate as the year goes by and later i can sell it to get profit.
Also if you can clarify is there any difference between a FD and RD. Coz my question intially was about Recurring Deposit and you mentioned about FD.
Thank you so much for the quick response. Really useful and i will spread this blog to my network of friends at office!

• Thanks Ben…
RD is Recurring Deposit – You invest regularly a fixed amount of money (say) each month.
FD is Fixed Deposit – It is a one time investment.

Investing in land is a good idea. Take care and do multiple checks before buying a piece of land.

Do not worry too much about tax rebates you enjoy because of home loan.
You shall first clear your loan.
This will creates new cash flow.
With the new cash-flow you can think of buying a more profitable (& tax friendly) investment.

• Thanks again Manish!! Yes buying a piece of land have to do a lot of homework and fieldwork and background. Yes i will first do the homeloan clearance.

My main motive is to save 1.5lakhs on the home loan interest. But it makes more sense to clear off the home loan first than to invest in piece of land.

98. I had taken homeloan of 11 lakhs in 2010.I have been paying loan of 13584 for all theses years still outstanding balance is 10lakhs25000rs If I do a prepayment loan of 3 lakhs now how much will be applied to principal and interest and how much can i save on loan

• Even if you have been paying loan since last 3 years (2010, 2011, 2012 & 2013) your loan balance should have been close to Rs 9,00,000.
I think there is some mistake.
Thanks,
Manish

99. I have taken a home loan for 20yrs and amount is 1650000 and over 3 years i already paid 6 lakhs. But the principal gone only some 25000.Now I want to change the loan to my wife s name as she is a bank employee she has got less interest loan.But my question is that what about the 6 lakh which I already paid.Any thing will go as now principal from that?Please clarify.

100. Hi,
I am having house loan of 20 lakhs for 10 years with intrest rate of 10.25.
I paid 1 lakh as part pre payment after 8th month. So how much i can save on intrest? what will be the reduction in my tenure?

101. Very good and useful information.

102. Hi,
First of all I would like to thank you much for sharing such a informative article, The loan is now very common all over the world. home loan eligibility calculator is very use full for new home loan buyers.

thanks
saverable.com

103. Hi Manish,

I am prospective candidate for a home loan. Your article truly provided me a good insight into the nitty gritty of prepayment.
this comment is just as a BIG THANKS to you.

104. Hi I have very basic question ……

If I sell the flat in 5 years and close the 20 year loan …… will bank demand increased interest since I am closing it in just 5 years though loan was taken for 20 years

• Initially penalty was applied if one choose to close home loan early.
But now no bank is allowed to charge penalty for prepayments (even if when one wants to completely close the loan)

105. hi manish really nice article, & nicely explain. thanks

i found one calculator which is good for home loan prepayment. it will give exact idea of saving on per payment.
kindly check this link. one think is this will work only online 🙂
https://docs.zoho.com/sheet/published.do?rid=y0e29fcdcb25b6a54492f87167ceba0622610

Thanks

106. Hello Sir, First of all i would like to thank you much for providing such a good article. This article really helps every Indian middle class peoples who has taken home loan and who are about to… I have taken loan of 15L for 20 yrs, one and a half years back in LIC HFL, My doubt:
1. Whether this kind of extra payment as prepayment option is available in LIC HFL ?
2. Also, i have now around 1L,
a. suppose if i settle this 1L, will there be any reduction in my EMI ?
b. if i settle this, 1L, how much many years should i pay ? i mean will there be any reduction in tenture ?
Plz help us to understand. and thanks in advance for your time. Thanks a lot!

107. Hi,
I have taken a loan of 20Lakhs for 20 years tenure(@10.95% fixed rate for 10 years) . As suggested by you i made a recurring deposit and made a prepayment of 2.5lakhs at 7 th month. I pay around 20K EMI. Imagine if i reduce my EMI by 5000 and pay them at the end of every year as Pre payment will that be fruittful. Also i am not able to find a EMI calculator which will show the impact if i reduce my EMI. Please help.

108. Girish Haganoor | November 10, 2013 at 11:55 am | Reply

I have taken loan Rs. 29,00,000/- with EMI Rs. 29,000/- for 240 months(20yrs) and later after 4 year I got changed EMI to Rs. 33,500/- for 118months(10yrs).
As per above calculations, whether should I change my EMI to Rs. 29,000/- and pay extra every month of Rs. 4,500/-, and save.
My question is, whether I will benifit or will number of years increase?

109. Can some one help me to chose a home loan between ..

Max gain account (which they chard 0.25%) more than the normal account …do i need chose this one over the normal account..as i end up in paying 0.25% !!

110. Any one has any idea..how prepayment is different from using MAX GAIN account option of SBI.

111. I have taken a NRI home loan for 2600000 for 15 yrs. Now I would like to prepay the amount of 2000000.My current EMI is 28,900.How should I do it? should I go for decreasing the EMI or go towards prepayment of principal amount. If I decrease the EMI , what will it come down to? If I go for decreasing the principal amount, how much would it go down on the years for loan repayment? which is more beneficial for me? I am really confused. Please advice. Thanks.

112. you helped me brother… thanx a ton.

113. I have taken a loan of Rs 20 Lakh in 2009 with an EMI of Rs 18625/- for 20 Yrs. I have been paying Rs 20000/- pm from the start. How much should I pay EMI to reduce loan tenure to 12 yrs

114. I am planning to take a loan of 60 lacs with ROI approx. 10.5 – 10.75% with a tenure of 20 years (EMI approx 60000/month). I think I may be able to put aside 15000/month for repayment initially for 3 years beyond which it can be increased to 25000/ month (this extra money i can start from 6 months after the EMI start). Please let me know the expected tenure with this adjustment.

115. Hi,
I have taken a home loan of INR 16 lakhs for a period of 13 years with rate of interest 9.5% . My EMIs started from Sept 2012. So, it has been little over 9 MONTHS now. My question is – if I want to pre-pay the principal now, since I have excess funds to the tune of INR 10 lakhs, how much benefit will I get? In terms of saving of interest amount and reduction of tenure etc. – please help. Thanks!

116. I believe paying part payment depends on many situation and it is not always a good option.

Generally when years goes by we should inflation take care of EMI, as the value of money may come down on subsequent years. for example EMI of 16000/ today may become 12000 in next 3 years in current value, 9000 in say another 3 years.

If you have lumpsum say 5 lakhs , you can invest in some avenues where we can get more interest or more value like intial payment for a plot in a developing area etc…
This 5 lakhs may yield more returns in many investment avenues than inflation

My personal opinion is, we should careful analyze the situation , before taking any decision.

117. hi …..i have taken loan from lichfl………….if i pay 5 lakhs at a time for my prepayment is there any problem with d incometax

118. Hi,

how repayment of loan’s tenure is calculated? please explain step by step…

119. Hi investment blogger,

You article is an eye opener. But i need an immediate help from you. I had taken a loan of 675000 for 15 years from canara bank in the year 2004 , i started my first EMI in July 2004 . My EMI is 6450/-. Now I am planning to free hold my house and pay off my all out standing, so that i can sell it out. I have paid my EMI until this month (ie) May 2013. I think the interest rate is 9 % or less. They did not mention in the statement. Could you please help me in calculating how much money i need to pay to the bank. I am not convinced of bank calculation. They say i need to pay around 500000/- . If you are busy just give me the formula for calculating the early settlement of loan
I am visiting bank next week, i live abroad. Thanx a lot.

120. Hi,

I have taken a loan of 20lakhs for 20years and emi of 19784.

Its been 43 months of emi completed and I am planning for prepayment of 7 to 10lac. Could you please help me to understand how many months will be reduce. Please suggest.

121. Hi,

I have one question for you. Part prepayment and increase in monthly EMI these are the options available to reduce interest & loan term. Out of these two which option is more beneficial.

122. http://www.bankbazaar.com/finance-tools/emi-calculator.html

I felt this website is very useful for emi calculator-including prepayment option.

123. Hi,
you mentioned the formula for calculating the emi,can you please mention the formula which will give the split of prinicipal and interest on monthly basis(as in the starting year interest charged by bank are more and its gradually decreases and reverse is in case of principal amount, so how the bank calculate those amounts on monthly basis).

124. Raj Malhotra | May 1, 2013 at 1:45 am | Reply

Loan amount is 48.5 INR @ interest rate of 11.4% Floating. The loan term is 19 Yrs. If I pay 25k INR extra every month towards the principal, how will it affect my loan tenure and savings in interest?
Also, did you post a link to the prepayment calculator in the post above? If yes, I am sorry, I will re-read and find it. If not, could you please share the calculator for the readers reference.

• Raj Malhotra | May 1, 2013 at 1:46 am | Reply

Sry I missed an L in the loan amount. The total loan amount if 48.5 Lacs INR. Thank you!

125. Sir,
I have taken a loan amount of 30 lakhs and i am still in pre-EMI stage.
1) I have 3 lakhs amount which i can do prepayment BEFORE EMI starts but i want to reduce the monthly EMI instead of tenure. Is there any possibilities for that?

2) Is there any possibility for reducing the monthly EMI instead of tenure after EMI starts?

Thanks
Dinesh

• Investment Blogger | May 1, 2013 at 5:16 am | Reply

(1) I do no think any bank will allow you to make prepayment in pre EMI stage.

(2) Yes, you can prepay your home loan with option of reducing your EMI instead of tenure.

• Thanks for your response, i have another doubt

Can we do prepayment immediately when my EMI starts, or is there any time frame till then we cannot do prepayment?. I heared we cannot do prepayment till 6 months after my EMI starts. is it true?
I have taken loan from LIC HFC.

• my pre emi has been started , can I prepay my loan now? & can’t I prepay by NEFT?

126. Hi Manish, how did you compute for the example satted above on 30 Laksh, the interest portion at 10.5% is 41 lakhs, was not clear on the computation front. Request help to understand.

127. Hi,

Nice informative article..

I have taken 28.5Lac with the interest of 10.8% from June 2011 for 20years. I have made prepayment of 5Lac this month apr2013.

The total loan amount disbursed till date is 21.5Lac. I am yet to get home in my hand and still some amount to be disbursed within next 3-4 months.

How much years i have reduced from 20years now. Also how you are calculating this reduction in tenture years.

Thanks..

• Investment Blogger | April 3, 2013 at 4:53 pm | Reply

Hi, I assume that your EMI is approx Rs 29,000.

Considering your prepayment of Rs 500,000 in your 22nd month, I consider the reduced loan tenure to be 14 years instead of 20 years.

Now i am very much confused whether i can go ahead and prepay more home loan as i have another 5lac with me now or to invest in some other residential land. Is diversification of money necessary here or i should concentrate more on perpayment of existing HomeLoan since i am in the early stages of EMI.

Also, if i am getting loan with very low interest rate(2.5%), can i use the same for prepayment or should i invest in FD/stock so that i can get atleast 10%.

Thanks

Hi, Very nice article.
One question though, I have a loan of 20 lakh for a tenure of 18years, after 6 years outstanding principal is 15lakh. Can I borrow money (around 5lakh) from my father or big brother to prepay my loan? Are there any issues related to tax or otherwise?

• Investment Blogger | March 30, 2013 at 2:14 pm | Reply

I do not see a tax related problem with this payment.
Just take care that your relatives pay the prepayment amount (Rs 5 lakhs) in cheque directly to your home loan account.

Contact your bank home loan department and they will tell you about details of cheque preparation.

129. Rajwinder Singh | March 10, 2013 at 5:45 pm | Reply

hi , i have taken a loan of Rs 2710584 for 15 yrs at 10.25% floating with no pre penalty charges. Since you blog already explained but i am still confusion over the issue of Reducing the loan tenure or Reducing the EMI. which one is good if pay rs 200000 /- after first EMI.

130. I have taken a home loan of INR 37 lakhs for a period of 20 years with a promotional interest of 9.5% for the first five years. Our EMIs started from January 2011. So, it has been little over 2 years now. My question is – if I want to pre-pay the principal now, since I have excess funds to the tune of INR 5 lakhs, how much benefit will I get? In terms of saving of interest amount and reduction of tenure etc. – please help. Thanks!

• Investment Blogger | February 12, 2013 at 7:38 am | Reply

Assuming, 9.5% interest applicable for 20 years.
Assuming, you make prepayment of Rs 5lakhs in 27th month.

Your saving of interest will be approx Rs 16lakhs.
Tenure will be reduced to 15 years from 20 years.

131. I had a query related to home loan repayment.
I had taken home loan of 40lakhs for 20yrs with EMI of 40k.
After 1 year i am doing prepayment of 5 lakhs with no penalty charges.
As per the bank if my EMI is same my tenure would just reduce by 12 months or 12 EMIs i.e 5lakhs/40 thousand = 12 months approx