Home Loan Prepayment Calculator

Why prepay your home loan?

Home loan interest works on reducing balance. Every rupee of principal you pay early stops accruing interest for the rest of the tenure. On a ₹50 lakh loan at 9% over 20 years, a single ₹2 lakh prepayment in year 2 saves you roughly ₹4.5 lakh in total interest and shortens the loan by ~10 months.

RBI rule: zero prepayment penalty (floating-rate loans only)

Since 2014, RBI has barred all banks from charging prepayment penalties on floating-rate home loans for individual borrowers. Fixed-rate loans can still charge 2-4% on the prepaid amount.

Two ways to use prepayment

• Reduce tenure (default for most banks): EMI stays same; loan ends earlier. Saves more interest. Best when you have a stable income.
• Reduce EMI: Tenure stays same; EMI drops. Saves less interest but eases monthly cash flow. Best if income is uncertain.

When prepayment is NOT the right move

• You have other higher-interest debt (credit card 42%, personal loan 14%). Pay those first.
• Your home loan is < 8.5%. A diversified equity portfolio at 12%+ historical return beats prepaying. Math: 8.5% loan vs 12% MF = invest the surplus.
• You're in old tax regime claiming Section 24(b). Each ₹1 lakh of interest paid saves ~30K in tax. Effective post-tax rate is 6%, not 8.5%. Prepayment becomes less attractive.
• You don't have a 6-month emergency fund first. Don't deplete savings to prepay; keep liquidity.

The smart prepayment schedule

• Make 1 extra EMI per year (most people use bonuses or tax refunds for this) — cuts ~3 years off a 20-year loan.
• Or, prepay 5% of outstanding principal annually — cuts ~5 years off a 20-year loan.
• Reverse-engineer it: enter different prepayment amounts in the calculator until you hit your target tenure.

Tax angle

Under the old tax regime, prepayment of principal counts toward Section 80C (₹1.5 lakh limit, shared with PPF, ELSS, EPF). Interest paid up to ₹2 lakh self-occupied counts under Section 24(b). Under the new regime (default for FY 2026-27), neither benefit applies for self-occupied — only let-out interest remains. Read our home loan tax benefits guide.

Compare with balance transfer

Sometimes a balance transfer to a lower rate saves more than prepayment. If your current rate is 9.5%+ and you can switch to 8.5%, the math often favors transfer over prepayment, even after 0.5% processing fee.