How do you use the home loan prepayment calculator?
- Enter the loan outstanding today, your interest rate and the years left on the loan. The calculator works out your EMI from these.
- Enter the amount you want to prepay now, and pick what to keep the same afterwards: the EMI (the loan ends sooner) or the years left (the EMI drops).
- Read the interest saved and the new end date. A yearly extra payment and prepayment charges are under “Add yearly prepayments and charges”.
How does prepaying a home loan save interest?
Interest on a home loan is charged each month on the balance still owed. A prepayment goes straight to the principal, so every later month is charged on a smaller balance. Keeping the same EMI after a prepayment sends more of each instalment to principal and shortens the loan, which usually saves the most. Lowering the EMI instead keeps the original end date and saves less, but frees up monthly cash.
Under the RBI’s directions, banks and housing finance companies cannot charge prepayment fees on floating-rate loans taken by individuals for non-business purposes, for part or full repayment, from any source of funds. The latest directions apply to loans sanctioned or renewed from 1 January 2026. Fixed-rate loans can carry charges disclosed in the loan agreement.
How the saving is worked out
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), r = rate ÷ 12, n = months leftInterest = balance × r; balance falls by EMI − interestInterest left without prepaying − interest left after prepaying − chargesWorked example: ₹ 5 lakh off a ₹ 50 lakh loan
At 8.5% with 20 years left, the EMI is ₹ 43,391 and the interest still to pay is ₹ 54,13,879. Prepaying ₹ 5 lakh and keeping the same EMI cuts the interest to ₹ 36,54,670, a saving of ₹ 17,59,209, and the loan ends 4 years 4 months sooner. Keeping 20 years instead lowers the EMI to ₹ 39,052 and saves ₹ 5,41,388.
Worked example: ₹ 1 lakh every year
With no lump sum but ₹ 1 lakh paid at the end of each year, the same loan saves ₹ 18,55,389 of interest and ends 6 years sooner.
Savings by prepayment amount
| Prepay now | Interest saved | Loan ends sooner by |
|---|---|---|
| ₹ 1,00,000 | ₹ 4,23,136 | 1 year |
| ₹ 2,00,000 | ₹ 8,05,219 | 1 year 11 months |
| ₹ 5,00,000 | ₹ 17,59,209 | 4 years 4 months |
| ₹ 10,00,000 | ₹ 29,07,636 | 7 years 6 months |
| ₹ 20,00,000 | ₹ 42,77,713 | 12 years |
What should you keep in mind?
- Keep an emergency fund before prepaying; money paid into the loan is hard to get back.
- On a floating rate, the rate can change over the years, so treat the saving as an estimate.
- Interest saved also reduces any interest deduction you claim. If you file under the old regime, check the effect with the Section 24 tax benefit calculator.
Frequently asked questions
Related answers and guides
- Prepay Your Home Loan or Invest the Surplus?
- How Much Home Loan Can I Get on My Salary in Bengaluru?
- Home Loan Questions: 20 to Ask and 15 Mistakes to Avoid
- Home Loan Affordability in Bengaluru: 2016–2026 Index
Sources
- Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, RBI/2025-26/64 of 2 July 2025, effective for loans sanctioned or renewed on or after 1 January 2026.
- Standard reducing-balance EMI and amortisation; default rate 8.5% and tenure 20 years are editable assumptions, not offers. Checked 19 Oct 2026.
Indicative only. Check the exact figures with your lender. Please verify any tax effect with your Chartered Accountant before acting.
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