The prepayment option is a way of paying off your loan amount in parts or in full before your loan tenure ends. This option can help you save money on interest, and reduce your loan tenure. Thus, let’s find out which option, is going to save you Rs 30 lakh on Rs 65 lakh, 25-year loan.

What is prepayment?

A prepayment is when you pay off a loan or mortgage earlier than planned. You can pay the whole amount at once or just a part of it. You can also make extra payments on top of your regular payments to pay it off faster.

When can you use prepayment option?

The option of prepayment depends on the type of loan and the lender’s policy. However, many banks have a lock-in period of 1–3 years, during which prepayment is not allowed.

Home loan calculations for Rs 65 lakh loan

We will do the calculations of Rs 65 lakh home loan at a 9.5 per cent interest rate for 25 years.

What will be your EMI on 65 lakh home loan?

The estimated EMI will be Rs 56,790.

What will be interest and repayment amount?

The estimated interest will be Rs 1,05,37,085 and estimated repayment will be Rs 1,70,37,085.

What will be prepayment amount?

We are considering Rs 6,50,000 as the prepayment amount (10 per cent of the loan’s principal amount)

When will you make prepayment?

We will make a prepayment in 3 instalments of Rs 2,16,666 each. For a loan started in February 2025, the first prepayment will be made in February 2028, the second in February 2029, and the third in February 2030. 

What to do after prepayment?

You can either keep the same EMI as before, or you can pick a reduced EMI option.

What if you opt for reduced EMI option?

If you choose the option of reducing your EMI after prepayment, your revised estimated EMI will be Rs 50,823 from Rs 56,790. It means you will save an estimated Rs 5,967 every month for the rest of your loan tenure. You will be saving Rs 8,52,977 interest on the loan. 

What if you opt for reduced tenure?

If you opt for the same EMI as it was before the prepayment (Rs 56,790), you will save the interest amount and your loan tenure will also be shortened. Your revised estimated time duration to repay the loan will be 5 years and 4 months. 

What will be your revised interest amount?

After choosing the option of the same EMI, you will save an estimated interest amount of Rs 30,12,771.

What will be your new loan tenure?

Your new loan tenure will be 19 years and 8 months instead of 25 years.