Home loan prepayment calculator

A home loan prepayment calculator will allow you to have a clear understanding of how a prepayment will let you pay off your home loan quickly. Prepayment of home loans before the completion of the loan tenure is a good step, as it helps the borrowers to become debt-ridden and save money in the long run.

Benefits of Using Home Loan Prepayment Calculator

The benefits of using a Home Loan Prepayment Calculator are given below:

  • Instant results: With the help of this calculator, you will get instant results. This will further help you in saving your time from doing the tedious calculations.
  • Easy-to-use: Using this tool is simple, anyone can use it without having practical knowledge. You just need to enter the information such as principal amount, loan tenure, rate of interest, prepayment amount, etc. to get the results.
  • Different combinations: This calculator lets you try the different combinations of the principal amount, interest rate, tenure, and prepayment amount to obtain the desired result. Recalculate as many times as you want free of cost.

How to Use Home Loan Prepayment Calculator?

The given-below is the which you need to follow to use the calculator.

  • Enter the principal amount of the loan: Principal amount is the total loan amount borrowed from a bank, NBFC, or a housing finance company.
  • Enter the rate of interest: This is the interest applicable to your home loan, as agreed and mentioned in your loan agreement.
  • Enter the loan tenure: Loan tenure or loan duration is the time within which you need to completely repay your loan amount in full.
  • Enter the prepayment amount: This is the amount that you wish to prepay against your home loan. Make sure this amount must be at least 3 times your EMI.

After providing all the details mentioned above, you will obtain two results:

  • EMI Saved: This shows the reduction in your EMI payments, and monthly savings after making the prepayment.
  • Tenure Saved: This shows the reduction in your loan tenure post prepayment.

Now let us understand how the home loan prepayment calculator works, by taking a general scenario and assuming the below-mentioned home loan details.

Outstanding Loan Amount: Rs. 10 lakhs

Balance Tenure: 360 months

Rate of Interest: 8.60%

Prepayment Amount: Rs. 1 lakh

Present EMI: Rs. 7,760

After filling-in the above-mentioned details in a home loan prepayment calculator, you will be able to check your savings in terms of EMI or the loan tenure, based on the option you have chosen.

For the above data, (i) if you wish to save on the EMI, then your new changed EMI after the prepayment of home loan would be Rs. 6,984. (ii) if you want your loan tenure to be reduced, then your new loan tenure after the prepayment would be 250 months.

Home Loan Prepayment Rules

As per the guidelines from RBI and National Housing Bank, the following are the prepayment rules for banks and housing finance companies-

Cases where the prepayment is not allowed

  • Banks are not allowed to charge prepayment charges on floating home loan rates taken by individuals, either on part or full prepayment.
  • The housing finance companies are not allowed to charge the prepayment penalty on fixed-rate home loans taken by individuals if the borrower makes the repayment from his own sources.
  • The housing finance companies are not allowed to charge a prepayment penalty if the prepayment is done when the loan has become a floating rate loan.

Cases when the prepayment is allowed

  • In the case of non-individual borrowers, banks can levy a prepayment penalty, as included in the loan agreement.
  • Banks can charge a prepayment penalty on fixed-rate home loans, as agreed by the customer in the loan agreement.
  • The housing finance companies can levy the prepayment penalty on fixed-rate home loans only if the borrower is repaying the loan by borrowing from another bank or the housing finance company.