Home Loan Prepayment Calculator

Home Loan Prepayment — Complete Guide

Making a lump sum prepayment on your home loan is one of the most effective ways to save money — but the timing and method matter. This calculator shows you the exact interest saved and the impact on your tenure or EMI.

Reduce tenure vs reduce EMI — which is better?

Reducing tenure saves more total interest because the principal drops faster, reducing the base on which future interest is calculated. This is almost always the mathematically optimal choice.

Reducing EMI is better if you need monthly cash flow relief — lower EMI every month frees up money for living expenses or other investments. The total interest saved is the same as reducing tenure, but distributed differently.

Best time to prepay

Interest is highest in the early years when the outstanding principal is at its maximum. A ₹5 lakh prepayment in year 2 saves far more than the same ₹5 lakh in year 15. If you have surplus cash, prepaying early in the loan tenure gives the best return.

Prepayment charges in India

• Floating rate loans: No prepayment charges allowed (RBI circular)
• Fixed rate loans: Banks may charge 2–3% of prepayment amount
• Tip: Always confirm with your bank before making the payment

Should you prepay or invest?

Compare your loan interest rate (after tax, if applicable) with expected post-tax investment returns. Home loan at 8.5%? FD returns 7% pre-tax (≈5% post-tax) — prepay. If you can consistently earn 12%+ in equity funds (not guaranteed), investing may win long-term. When in doubt, split: prepay 50%, invest 50%.

Can I make multiple prepayments?

Yes — most banks allow unlimited prepayments on floating rate loans without charges. Making regular annual prepayments (from bonuses, tax refunds, etc.) dramatically accelerates loan payoff. Each prepayment should be followed by a revised amortization schedule from your bank.

Does prepayment affect 80C tax benefit?

The 80C deduction is on the principal repayment portion of your EMI — prepayment counts as principal repayment and is eligible for 80C (subject to the ₹1.5 lakh annual cap, shared with other 80C investments). The interest you save through prepayment is not separately deductable — but paying less interest is still a net financial benefit.