Home Loan Prepayment Strategy Calculator
Compare home loan prepayment strategies — reduce tenure, reduce EMI, or increase EMI — and find the best approach to save interest.
Strategy Comparison
Interest Saved
₹28,34,699
Time Saved
10 yr
Effective Savings (After Tax)
₹28,34,699
Original EMI
₹43,391
New Total Interest
₹25,79,242
New Tenure
10 yr
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Year-by-Year Amortization Schedule
| Year | EMI Paid | Prepayment | Interest Paid | Principal Paid | Closing Balance |
|---|---|---|---|---|---|
| Year 1 | ₹5,20,692 | ₹60,000 | ₹4,18,789 | ₹1,61,903 | ₹48,38,097 |
| Year 2 | ₹5,20,692 | ₹2,60,000 | ₹4,04,478 | ₹3,76,214 | ₹44,61,883 |
| Year 3 | ₹5,20,692 | ₹2,60,000 | ₹3,71,224 | ₹4,09,468 | ₹40,52,416 |
| Year 4 | ₹5,20,692 | ₹2,60,000 | ₹3,35,031 | ₹4,45,661 | ₹36,06,755 |
| Year 5 | ₹5,20,692 | ₹2,60,000 | ₹2,95,639 | ₹4,85,053 | ₹31,21,701 |
| Year 6 | ₹5,20,692 | ₹2,60,000 | ₹2,52,764 | ₹5,27,928 | ₹25,93,774 |
| Year 7 | ₹5,20,692 | ₹2,60,000 | ₹2,06,100 | ₹5,74,592 | ₹20,19,182 |
| Year 8 | ₹5,20,692 | ₹2,60,000 | ₹1,55,312 | ₹6,25,380 | ₹13,93,802 |
| Year 9 | ₹5,20,692 | ₹2,60,000 | ₹1,00,034 | ₹6,80,658 | ₹7,13,144 |
| Year 10 | ₹5,20,692 | ₹2,32,322 | ₹39,870 | ₹7,13,144 | ₹0 |
What is Home Loan Prepayment?
Home loan prepayment (also called part payment or partial prepayment) means paying an amount over and above your regular EMI to reduce the outstanding principal. Since home loan interest is calculated on the outstanding balance, every prepayment directly reduces the interest you pay in all future months. On a typical ₹50 lakh home loan at 8.5% for 20 years, the total interest payable is about ₹52 lakh — almost equal to the loan itself. Even a small prepayment of ₹1-2 lakh per year can save you ₹10-15 lakh in interest and close your loan 5-7 years early.
How to Use This Home Loan Prepayment Calculator
- Enter your loan amount, interest rate, and tenure.
- Choose a prepayment strategy — reduce tenure, reduce EMI, or increase EMI.
- Enter the prepayment amount (lumpsum, monthly extra, or both).
- Select your tax bracket to see effective savings after Section 24 deduction.
- Compare all 3 strategies in the comparison card to find the best one for you.
Which Prepayment Strategy is Best?
The best strategy depends on your financial goals. Reduce Tenure saves the most interest overall because the loan closes faster, reducing the total compounding period. Reduce EMI lowers your monthly outflow, giving you more cash in hand each month — useful during uncertain times. Increase EMI is ideal for salaried professionals expecting annual increments; a 5-10% yearly EMI increase can cut your loan tenure by 5-7 years.
Home Loan Prepayment Benefits
- Massive interest savings — Save lakhs of rupees over your loan tenure.
- Become debt-free sooner — Close your loan years before the original tenure.
- Lower financial burden — With reduce EMI strategy, your monthly outflow decreases.
- Better CIBIL score — Lower outstanding debt improves your credit score.
- No penalty on floating rate — RBI mandates zero prepayment charges on floating rate home loans.
Home Loan Prepayment Charges in India
As per RBI circular dated June 2012, banks and HFCs cannot charge any prepayment penalty on floating rate home loans. Since most home loans in India are floating rate, you can prepay any amount at any time without extra charges. For fixed rate home loans, banks may charge up to 2% of the prepaid amount. Banks like SBI, HDFC, ICICI, Axis Bank, Bank of Baroda, and PNB all allow free prepayment on floating rate loans through net banking.
Monthly Extra vs Lumpsum Prepayment
Adding a small extra amount to your EMI every month (e.g., ₹5,000-10,000) is often more effective than waiting to accumulate a large lumpsum. Monthly extra payments reduce the principal continuously, lowering interest from the very next month. You can combine both — use monthly extra for regular savings and lumpsum for bonuses or windfalls.
Tax Impact of Home Loan Prepayment (Section 24)
Under Section 24(b) of the Income Tax Act, you can claim up to ₹2 lakh deduction on home loan interest for self-occupied property. Prepaying reduces the interest component, which may lower your tax benefit. Use the tax bracket toggle above to see how your effective savings change after accounting for this impact. If you are in the new tax regime (which has no Section 24 deduction), prepayment gives you full savings with no tax offset.