Home Loan Prepayment Calculator

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

1. Enter your loan amount, interest rate and tenure — use the current outstanding balance if the loan is already running.
2. Set the one-time prepayment you plan to make and choose after how many months you will make it.
3. Optionally add an extra amount to every EMI — even ₹2,000–₹5,000 a month adds up fast.
4. 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:

How much does each rupee of prepayment save?

The table above varies the timing. This one varies the amount, holding everything else fixed — ₹30 lakh at 8.5% for 20 years, prepaid at the end of year 1. The last column is the one worth studying: how many rupees of interest each rupee of prepayment removes.

Notice that the multiple falls as the amount rises: ₹1 lakh returns 3.70× but ₹10 lakh returns 2.17×. Larger prepayments save more in absolute terms, but each additional rupee saves less, because once the balance drops the remaining interest you could still avoid is smaller. The practical reading is encouraging rather than discouraging — you do not need to wait until you have a large sum. Prepaying ₹1 lakh five times as it becomes available is more efficient per rupee than waiting years to prepay ₹5 lakh at once, and it also starts sooner, which the timing table below shows matters just as much.

For context, the total interest on this loan without any prepayment is ₹32,48,327 on ₹30 lakh borrowed — you would pay more in interest than you borrowed. The EMI is ₹26,035. To model the same loan before prepayment, use the home loan EMI calculator.

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:

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.

Download the schedule — no spreadsheet needed

Plenty of people go looking for a home loan prepayment calculator in Excel, and the reason is fair: a single "interest saved" figure is hard to trust. You want to see the balance actually fall, year by year, and check the arithmetic yourself.

The Prepayment schedule table above does that. For each year it shows the principal repaid, the interest paid, how much of that principal came from your prepayments, and the closing balance. Press Download CSV and you get the whole schedule as a file that opens directly in Excel, Numbers or Google Sheets — where you are free to re-check every row.

Two things worth knowing when you do check it. The Of Which Prepaid column is a subset of Principal Paid, not an addition to it — prepayments are principal, which is exactly why they work. And the final year is usually a part-year: the loan closes the month the balance hits zero, so that row covers fewer than twelve months and the last payment is smaller than a full EMI.

Against the worked example above, the schedule totals ₹30,00,000 of principal — the whole loan — and ₹18,34,581 of interest, which is the same figure the calculator reports. If those two do not reconcile for your numbers, something is wrong and we would like to hear about it.

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.