Home Loan Prepayment Calculator

What a prepayment actually does

A prepayment, or part payment, goes straight to the principal. Interest is charged each month on what you still owe, so every rupee you clear today stops costing interest for all the months it would have stayed on the loan. That is why a part payment early in a home loan saves far more than the same amount near the end.

After a prepayment your lender recasts the loan one of two ways. It keeps the EMI and shortens the tenure, or it keeps the end date and lowers the EMI. This calculator works out both from the same month-by-month simulation, so you can compare them on your own loan before you ask your bank for either.

How the calculator works it out

It first finds your EMI with the standard reducing-balance formula below, where P is the outstanding amount, i the monthly rate (annual rate ÷ 12 ÷ 100) and n the months left. Then it runs the loan month by month: interest on the balance, the rest of the EMI to principal, and your lump sum or monthly extra taken off the balance.

To keep the EMI, it counts how many months the smaller balance takes to clear. To lower the EMI, it applies the same formula to the new balance over the original months left. The interest saved is the total interest of the original loan minus the total of the new one.

A worked example: ₹30 lakh at 8.5% with 20 years left

The EMI is about ₹26,035 and, with no prepayment, the interest over 20 years adds up to about ₹32,48,327. The table shows what three different prepayment plans do to the same loan.

Keeping the EMI after a ₹2,00,000 part payment saves about ₹7,56,579 and ends the loan 3 years early. Using the same ₹2,00,000 to lower the EMI saves only ₹2,16,555, but frees about ₹1,736 a month now. A steady ₹5,000 a month on top of the EMI beats both: about ₹11,73,056 saved and the loan cleared in 13 years and 8 months.

Timing matters as much as the amount. The same ₹2,00,000 on a ₹30 lakh loan with only 10 years left (EMI about ₹37,196) saves about ₹2,48,530 and 1 year, a third of what it saves with 20 years to go.

Reduce the EMI or the tenure?

Reducing the tenure saves the most interest, because the balance keeps falling at the old pace. Choose it when the current EMI is comfortable and your emergency fund is in place.

Reducing the EMI saves less, but lowers a fixed cost every month. It suits you when money is tight, or when a rate rise has already stretched your tenure and you want the instalment back under control. Many lenders do one by default, so say which you want in writing when you prepay.

Prepayment charges: what RBI allows

Banks, housing finance companies and other NBFCs cannot charge a prepayment or foreclosure fee on a floating-rate loan given to an individual for a non-business purpose, which covers almost every home loan. The rule applies to part and full prepayment, whatever the source of the money, and with no minimum lock-in. For loans sanctioned or renewed from 1 January 2026 it is set out in the Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, dated 2 July 2025. Older floating-rate home loans were already covered by earlier RBI instructions.

On a fixed-rate loan, the lender’s own policy applies, but any charge must be stated in the sanction letter, the loan agreement and the key facts statement, and a charge not disclosed there cannot be levied. On a dual-rate loan, what counts is whether it is on a floating rate when you prepay.

This calculator assumes the rate stays where you enter it. A floating rate will move over the life of the loan, so treat the result as an estimate and re-run it when your rate resets.