Home Loan Prepayment Calculator — See How Much You Save
Calculate how much interest you save by making prepayments on your home loan. Compare tenure reduction vs EMI reduction options with our free tool.
Making prepayments on your home loan is one of the smartest financial moves you can make. Even a single lump sum prepayment of Rs 1-2 lakh per year can save you Rs 10-20 lakh in total interest and reduce your loan tenure by years. Banks in India cannot charge prepayment penalties on floating rate home loans as per RBI guidelines. Use our calculator to see the dramatic impact of prepayments on your total interest savings.
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Key Information
| Parameter | Details |
|---|---|
| Prepayment Penalty (Floating) | NIL (RBI mandate) |
| Prepayment Penalty (Fixed) | 2% - 4% of prepaid amount |
| Impact of Rs 1L Prepayment | Saves Rs 2-4L in total interest (20yr loan) |
| Best Time to Prepay | First 5-7 years (maximum interest savings) |
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Use Calculator NowFrequently Asked Questions
How much do I save by prepaying Rs 2 lakh yearly?
On a Rs 50 lakh home loan at 8.5% for 20 years making an annual prepayment of Rs 2 lakh can reduce your tenure by approximately 6-7 years and save you Rs 15-20 lakh in total interest. The earlier you start prepaying the more you save because interest component is highest in the early years of the loan.
Should I prepay home loan or invest in mutual funds?
If your home loan interest rate is 8.5% and you can earn 12-15% in equity mutual funds mathematically investing gives better returns. However prepaying the loan gives guaranteed savings equal to the interest rate while equity returns are uncertain. A balanced approach works best: prepay enough to keep EMI comfortable while investing the surplus in SIP for wealth creation.
Reduce tenure or reduce EMI which is better?
Reducing tenure saves significantly more interest than reducing EMI. On a Rs 40 lakh loan at 8.5% a Rs 5 lakh prepayment with tenure reduction saves approximately Rs 8.5 lakh in interest while the same prepayment with EMI reduction saves only Rs 5.2 lakh. Always choose tenure reduction unless you need the cash flow relief of a lower EMI.
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Last updated: 24 March 2026