Home Loan Prepayment Calculator

Since 2012, the RBI prohibits prepayment penalties on floating-rate home loans taken by individual borrowers. This means you can prepay any amount, at any time, without paying a foreclosure or part-payment charge on your floating-rate retail home loan.

Fixed-rate home loans can still attract a foreclosure charge — usually 2–4% of the outstanding amount, sometimes capped at a maximum rupee value. The exact penalty varies by lender and the terms negotiated at loan disbursement.

Before making a large prepayment, confirm with your lender: (1) is your loan floating-rate or fixed-rate, (2) what is the prepayment charge (if any) on your specific product, and (3) is there any restriction on the number of prepayments per year. Get it in writing.

When you make a prepayment, your lender offers two ways to apply it: shrink the tenure (keep the EMI constant, finish the loan earlier) or reduce the EMI (keep the original tenure, lower the monthly payment).

• Shrink-tenure saves significantly more total interest. By keeping the EMI constant, you finish the loan years earlier and cut off the most expensive late-stage interest months. Use this when your goal is to minimise lifetime interest paid.
• Reduce-EMI helps cash flow. By keeping the tenure constant and dropping the monthly EMI, you free up monthly cash. Use this when your priority is to lower the monthly outflow (e.g., a single-income household after a layoff).

The calculator above lets you toggle between the two modes and see the exact rupee impact for your loan. For most borrowers focused on lifetime cost, shrink-tenure is the better choice.

Prepayment has its biggest impact in the early years of the loan, because the interest portion of each EMI is highest then. A ₹1,00,000 prepayment in year 2 of a 20-year loan saves dramatically more total interest than the same ₹1,00,000 paid in year 15.

The intuition: every rupee of principal you prepay early eliminates all the interest that rupee would have generated across every remaining month of the loan. Prepay early and you wipe out 18+ years of future interest on that rupee; prepay late and you wipe out only a year or two.

Practical rule of thumb: if you have a windfall (annual bonus, gift, asset sale, ESOP exit) and your loan still has more than 10 years remaining, that is the optimal moment to prepay — provided your emergency fund is intact and you have no higher-cost debt (credit card / personal loan) to clear first.

Yes — and this is a frequently missed cost. Under the old tax regime, Section 24(b) lets you deduct up to ₹2,00,000 per financial year of home loan interest from your taxable income for a self-occupied property. When you prepay aggressively, your annual interest paid drops, so the deduction you can claim drops along with it.

At a 30% marginal tax bracket, every ₹100 of interest deduction you lose costs you ₹30 of extra tax. So the effective post-tax cost of your loan is lower than the headline rate — if you're at an 8.5% gross rate and a 30% bracket, your effective rate is closer to 6% on the portion that benefits from the deduction.

The new tax regime (default from FY 2026-27) does not allow Section 24(b) for a self-occupied property, so this consideration vanishes for those who've opted into the new regime.

Factor this into the prepay-vs-invest decision: the lower post-tax effective loan rate makes investing in equity (at ~12% pre-tax) relatively more attractive than the headline 8.5% comparison suggests. Consult a qualified Chartered Accountant for your specific situation.