Home Loan Prepayment Calculator
See exactly how much interest you save and how many months you shave off your home loan when you make a one-time prepayment or add a little extra to every EMI. This tool uses the tenure-reduction strategy — your EMI stays the same while the loan closes sooner.
What is home loan prepayment?
Prepayment means paying more than your scheduled EMI to knock down the outstanding principal ahead of time. Because a home loan charges interest on the reducing balance, every rupee you prepay stops earning interest for the lender for the rest of the tenure. On a 20–30 year loan that compounding effect is enormous — a modest prepayment in the early years can wipe out several lakhs of future interest.
There are two ways to reinvest that saving. You can keep the EMI the same and shorten the tenure (the loan simply closes earlier), or keep the tenure the same and lower the EMI. This calculator uses the tenure-reduction strategy, which almost always saves more interest, because your full EMI keeps chipping away at a smaller balance.
How this calculator works
First it computes your EMI with the standard reducing-balance formula — the same one behind our Home Loan EMI Calculator and Loan EMI Calculator:
EMI = P × r × (1 + r)^n ÷ [ (1 + r)^n − 1 ]
It then runs your loan month by month. Each month the interest is charged on the outstanding balance, the EMI (plus any extra you add) reduces the principal, and in the month you choose, your one-time lump sum is subtracted as well. The loan closes the moment the balance hits zero, and the tool compares that shorter schedule against the original one.
How to use this calculator
- Enter your loan amount, interest rate and tenure — use the current outstanding balance if the loan is already running.
- Set the one-time prepayment you plan to make and choose after how many months you will make it.
- Optionally add an extra amount to every EMI — even ₹2,000–₹5,000 a month adds up fast.
- Read off your interest saved, the new tenure and how many months you have shaved off, all with the EMI held constant.
You can model a lump sum, a monthly top-up, or both together to see which plan clears your loan fastest for the cash you have available.
Worked example: ₹30 lakh at 8.5% for 20 years
Suppose you borrow ₹30,00,000 at 8.5% p.a. for 20 years. Your EMI is about ₹26,035, and if you never prepay you would hand the bank roughly ₹32.48 lakh in interest. Now imagine you prepay a ₹5,00,000 bonus at the end of year 1 and keep paying the same EMI:
| Scenario | Monthly EMI | Tenure | Total Interest |
|---|---|---|---|
| No prepayment | ₹26,035 | 240 months (20 yrs) | ₹32,48,327 |
| Prepay ₹5L after 1 year | ₹26,035 | 167 months (~13 yr 11 mo) | ₹18,34,581 |
| You save | — | 73 months (~6 yrs) | ₹14,13,746 |
Timing matters: prepay early
In the early years of a home loan the interest component of each EMI is at its highest, so prepayments made then remove the most costly rupees of debt. The table below keeps everything identical — ₹30 lakh at 8.5% for 20 years, a ₹5 lakh lump sum — and only changes when you prepay, or swaps it for a steady monthly top-up:
| Prepayment strategy | Interest saved | New tenure | Time saved |
|---|---|---|---|
| ₹5L lump sum in year 1 | ₹14,13,746 | ~13.9 yrs | ~6.1 yrs |
| ₹5L lump sum in year 5 | ₹9,57,614 | ~15.4 yrs | ~4.6 yrs |
| ₹5L lump sum in year 10 | ₹5,16,555 | ~16.8 yrs | ~3.3 yrs |
| ₹5,000 extra every month | ₹11,73,056 | ~13.7 yrs | ~6.3 yrs |
| ₹10,000 extra every month | ₹17,00,094 | ~10.6 yrs | ~9.4 yrs |
The same ₹5 lakh saves nearly three times as much interest in year 1 as it does in year 10. A small, disciplined monthly extra can rival a big lump sum — and one extra EMI a year (funded by an annual bonus) is one of the easiest habits to sustain.
Prepayment charges and RBI rules
The Reserve Bank of India bars banks and housing finance companies from levying foreclosure or prepayment penalties on floating-rate home loans taken by individuals. That means you can part-prepay or fully close such a loan for free. A few caveats worth checking:
- Fixed-rate loans may still carry a prepayment charge, often around 2% of the amount prepaid.
- Some lenders ask you to specify whether a prepayment should reduce the tenure or the EMI — always choose tenure reduction for maximum saving.
- Keep the lender's acknowledgement and a revised amortization schedule after each prepayment.
Good sources to fund prepayments include annual bonuses, maturing fixed deposits, tax refunds, and windfalls like gratuity or an insurance payout. Routing just one of these into the loan each year — the equivalent of one or two extra EMIs annually — quietly compresses a 20-year loan into something far shorter without straining your monthly budget.
Should you prepay or invest?
Prepaying gives you a guaranteed, tax-free "return" equal to your loan rate. Ask whether an investment could reliably beat it after tax. At today's ~8.5% home loan rates the maths often favours prepayment, but if your rate is low you might do better investing the surplus — compare the outcome with our SIP Calculator. Two other points:
- If you claim the Section 24(b) interest deduction under the old tax regime (up to ₹2,00,000 a year on a self-occupied house for FY 2026-27), your effective loan cost is lower — factor that in with the Income Tax Calculator. Under the new regime this deduction is not available, so prepayment looks even more attractive.
- Never drain your emergency fund to prepay. Clear high-cost debt first and keep 6 months of expenses aside before accelerating a cheap home loan.
Still deciding how much loan to take on? Check the comfortable EMI band with our Home Loan Eligibility Calculator before you borrow, then use this tool to plan how fast you can pay it off.