Should I prepay or invest the surplus?

Compare loan rate vs. expected post-tax investment return. Home loan at 8.5% = guaranteed 8.5% "return" from prepayment. Equity MF long-term averages 12% pre-tax but has volatility risk. Rule of thumb: prepay if loan rate > 8%, invest if < 7%, split if in between.

Should I reduce EMI or tenure when prepaying?

ALWAYS choose "reduce tenure" — this saves far more interest. "Reduce EMI" only frees up monthly cash flow. On ₹40L loan at 8.5% for 20 years with ₹5L prepayment, reduce-tenure saves ~₹11L interest; reduce-EMI saves only ~₹2L.

What about the tax benefit I lose by prepaying?

Section 24(b) allows ₹2L interest deduction/year. If you're in 30% slab, that's ₹60K annual tax saving. Prepaying reduces future interest → reduces this benefit. But the interest saved usually FAR exceeds lost tax benefit at rates >7.5%. Calculate exactly for your case.

Should I prepay or invest the surplus?

Compare loan rate vs. expected post-tax investment return. Home loan at 8.5% = guaranteed 8.5% "return" from prepayment. Equity MF long-term averages 12% pre-tax but has volatility risk. Rule of thumb: prepay if loan rate > 8%, invest if < 7%, split if in between.

Should I reduce EMI or tenure when prepaying?

ALWAYS choose "reduce tenure" — this saves far more interest. "Reduce EMI" only frees up monthly cash flow. On ₹40L loan at 8.5% for 20 years with ₹5L prepayment, reduce-tenure saves ~₹11L interest; reduce-EMI saves only ~₹2L.

What about the tax benefit I lose by prepaying?

Section 24(b) allows ₹2L interest deduction/year. If you're in 30% slab, that's ₹60K annual tax saving. Prepaying reduces future interest → reduces this benefit. But the interest saved usually FAR exceeds lost tax benefit at rates >7.5%. Calculate exactly for your case.

Home Loan Prepayment Calculator

How much interest + tenure you save by making a lump-sum or increased-EMI prepayment on your Indian home loan.

Result

Total interest saved

₹1,403,609

Original EMI₹36,218
Baseline total interest (no prepayment)₹3,823,152
New total interest₹2,419,543
Tenure saved4 yrs 4 months
New loan tenure13.7 years

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How to use this calculator

Enter your current outstanding loan principal.
Enter interest rate and remaining tenure.
Enter lump-sum prepayment amount (or 0 if only hiking EMI).
Enter extra monthly EMI (or 0 if only lump-sum).
Read interest and tenure saved.

About this tool

Home loan prepayment is one of the most tax-efficient wealth moves in India — every rupee prepaid saves you 8-9% guaranteed (the rate you'd have paid as interest), and RBI rules ban prepayment penalties on floating-rate home loans since 2012. There are two prepayment approaches: (1) LUMP SUM (one-time payment reduces principal, shortens tenure) — best for annual bonus/inheritance windfalls; (2) EMI HIKE (permanently increase monthly EMI) — best for salary hikes. This calculator shows exactly how much interest and how many years each approach saves. Note: prepayment beats fixed deposit whenever loan rate exceeds post-tax FD rate.

Frequently asked

For FLOATING-rate home loans: no prepayment charges since RBI's April 2012 rule. For FIXED-rate loans: 2-4% penalty may apply. Check your loan agreement. Most Indian home loans are floating rate today, so prepayment is fee-free.

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