Home Loan Prepayment Calculator – Save Interest & Tenure
See how much interest and tenure you can save by prepaying your home loan.
Home Loan Prepayment Calculator
What is a home loan prepayment calculator?
A prepayment (or part-payment) is an extra lump sum you pay towards your home loan principal over and above your regular EMI. Because home loan interest is charged on the outstanding balance, every rupee you prepay stops attracting interest for the rest of the loan. Our calculator compares your original loan with the loan after a prepayment and shows the interest you save, along with the new tenure or new EMI.
Reduce tenure or reduce EMI?
After a prepayment, banks usually let you choose between two options:
- Reduce tenure: your EMI stays the same and the loan closes earlier. This saves the most interest.
- Reduce EMI: the tenure stays the same and your EMI is recalculated on the lower balance. This improves monthly cash flow but saves less interest.
How the calculation works
The original EMI is calculated with the standard formula EMI = P × i × (1 + i)^n / ((1 + i)^n − 1), where i is the monthly rate and n the number of months. The calculator then builds a month-by-month amortisation schedule. In the month you prepay, the lump sum is deducted from the outstanding principal. For “reduce tenure”, the same EMI continues until the balance reaches zero; for “reduce EMI”, a new EMI is computed on the remaining balance over the remaining months.
How to use the calculator
- Enter your loan amount, interest rate and original tenure.
- Enter the prepayment amount and the month after which you will pay it.
- Choose “reduce tenure” or “reduce EMI”.
- Compare original interest with the new total interest in the chart.
Example: ₹50 lakh loan at 8.5% for 20 years
The original EMI is ₹43,391 and total interest is ₹54,13,879. A ₹5 lakh prepayment after 24 months with the reduce-tenure option closes the loan in 195 months instead of 240 and saves ₹14,57,301. The table compares different prepayment amounts, each made after month 24.
| Prepayment | New tenure (reduce tenure) | Interest saved (reduce tenure) | New EMI (reduce EMI) | Interest saved (reduce EMI) |
|---|---|---|---|---|
| ₹2,00,000 | 221 months | ₹6,58,981 | ₹41,580 | ₹1,91,158 |
| ₹5,00,000 | 195 months | ₹14,57,301 | ₹38,864 | ₹4,77,894 |
| ₹10,00,000 | 161 months | ₹24,39,611 | ₹34,337 | ₹9,55,788 |
Why early prepayments save more
In the early years most of your EMI goes towards interest. Prepaying then cuts the principal when it is largest, so the saving is far bigger than the same prepayment made in year 15. Even one prepayment a year, such as from your annual bonus, can shave years off a home loan.
Things to check before prepaying
- Charges: RBI rules mean banks cannot charge prepayment penalties on floating-rate home loans to individuals. Fixed-rate loans may carry a fee.
- Tax benefits: under the old regime, you can claim up to ₹2 lakh of interest under Section 24(b) and principal under Section 80C. Prepaying reduces future interest deductions.
- Emergency fund: keep 6 months of expenses aside before prepaying.
- Opportunity cost: compare the loan rate with expected returns from our SIP calculator.
Start with the home loan EMI calculator to view your full amortisation schedule, or visit EMITotal for more loan tools.
Prepayment vs investing the money
Prepaying a loan gives a guaranteed, tax-free return equal to your loan interest rate. If your home loan costs 8.5%, every rupee prepaid effectively earns 8.5% with no risk. Equity investments may earn more over long periods but carry volatility. Many borrowers split surplus money between the two, prepaying regularly while continuing their SIPs. If you are in the old tax regime and use the full Section 24(b) interest deduction, your effective loan cost is lower, which slightly favours investing; in the new regime there is no such deduction for a self-occupied home, which makes prepayment more attractive.
Frequently asked questions
Is it better to reduce tenure or EMI after prepayment?
Reducing tenure saves more interest because you keep paying the higher EMI. Choose reduce EMI only if you need lower monthly outflow.
Do banks charge a penalty for home loan prepayment?
For floating-rate home loans taken by individuals, RBI does not allow prepayment penalties. Fixed-rate loans may carry charges of around 2–3% of the amount prepaid.
When is the best time to prepay a home loan?
As early as possible, since interest makes up most of each EMI in the first years. A prepayment in year 2 saves far more than one in year 15.
How often can I prepay my home loan?
Most lenders allow multiple part-payments a year, sometimes with a minimum amount such as one EMI. Check your loan agreement.