Home Loan Prepayment Calculator
See how much interest you save by prepaying – and whether to cut your tenure or your EMI
| No prepayment | Reduce tenure | Reduce EMI |
|---|
“Reduce EMI” keeps your end date the same and lowers the monthly payment; it applies the one-time prepayment only. The extra monthly payment is included in “Reduce tenure”.
Why Prepaying Your Home Loan Saves So Much
In the early years of a home loan, most of your EMI goes towards interest, not principal. On a ₹40 lakh loan at 8.5%, you’d pay over ₹38 lakh in interest across 18 years – almost as much as you borrowed. Every rupee you prepay cuts the principal directly, so you stop paying interest on it for the rest of the loan.
And there’s no penalty for doing it: banks can’t charge prepayment fees on floating-rate home loans taken by individuals, and RBI’s updated rules confirm this for floating-rate loans sanctioned or renewed from 1 January 2026, whether you prepay part or all of the loan and whatever the source of the money.
How to Use the Prepayment Calculator
- Enter the amount you still owe, your interest rate and the years left on your loan. You’ll find these in your loan statement.
- Enter a one-time prepayment – a bonus, maturing FD or gratuity, for example.
- Optionally, add an extra amount you could pay every month.
You’ll see how much interest you save, how much sooner you’ll be debt-free, and a side-by-side comparison of reducing your tenure versus reducing your EMI.
Reduce Tenure or Reduce EMI?
When you prepay, your bank lets you choose: keep paying the same EMI and finish earlier, or keep the same end date and pay a lower EMI. Here’s what a ₹5 lakh prepayment does to a ₹40 lakh loan at 8.5% with 18 years left:
| No Prepayment | Reduce Tenure | Reduce EMI | |
|---|---|---|---|
| Monthly EMI | ₹36,218 | ₹36,218 | ₹31,691 |
| Time left | 18 years | 13 years 8 months | 18 years |
| Total interest | ₹38.23 lakh | ₹24.20 lakh | ₹33.45 lakh |
| Interest saved | – | ₹14.04 lakh | ₹4.78 lakh |
Reducing the tenure saves almost three times as much interest. That’s the better choice if you can comfortably keep paying your current EMI. Choose to reduce the EMI if your budget is tight or your income is uncertain – you still save, and you get breathing room every month.
Prepay Early – Timing Matters a Lot
The same ₹5 lakh saves very different amounts depending on when you prepay. On a ₹50 lakh, 20-year loan at 8.5% (reducing tenure):
| Prepay ₹5 Lakh After | Interest Saved |
|---|---|
| Right at the start | ₹17.59 lakh |
| 5 years | ₹10.69 lakh |
| 10 years | ₹5.71 lakh |
| 15 years | ₹2.22 lakh |
The earlier you prepay, the more interest you avoid. Prepayments in the first five to seven years have the biggest impact.
Small Monthly Extras Add Up
You don’t need a big lump sum. On the same ₹40 lakh loan, paying just ₹5,000 extra every month saves about ₹10.3 lakh in interest. Combine it with the ₹5 lakh prepayment and you save ₹19.5 lakh – and finish the loan more than 7 years early.
Prepay or Invest?
Prepaying gives you a guaranteed “return” equal to your loan’s interest rate – around 8–9% today. Investing might earn more over the long run, but it isn’t guaranteed. A sensible approach:
- First, keep an emergency fund of at least six months’ expenses plus EMIs. Don’t prepay with money you might need.
- Prepay more if your loan rate is high, you value peace of mind, or you’re in the new tax regime (where home loan interest on a self-occupied home gets no tax deduction).
- Invest more if your rate is low, you have 10+ years and can handle market swings, and you’re in the old regime claiming the ₹2 lakh interest deduction.
- Or split it: many people put half their surplus into prepayment and half into a SIP. See our SIP Calculator.
Questions People Actually Ask Us
Is there a penalty for prepaying a home loan? Not on floating-rate home loans taken by individuals. Fixed-rate loans may carry a charge – check your loan agreement.
Is there a minimum prepayment amount? Some banks set a minimum, often equal to one or a few EMIs. Check with your lender.
Will my bank automatically reduce my tenure? Many banks reduce the tenure by default but let you choose. Tell your bank in writing which option you want.
Does prepayment affect my tax benefits? In the old regime, a smaller loan means less interest to deduct. But you only save tax on a fraction of the interest you pay, so prepaying usually still leaves you better off overall.
Disclaimer: This calculator is for educational purposes only. It assumes the interest rate stays the same and that the prepayment is made today; floating rates can change. Your bank’s figures may differ slightly. This calculator has no connection to any bank. See our full Disclaimer.
Also Try These Calculators on TappingMoney:
- EMI Calculator – Work out the EMI for any loan
- Income Tax Calculator – Compare the old and new tax regimes
- SIP Calculator – See how investing the money could grow
- Gratuity Calculator – Estimate a lump sum you could use to prepay
Page last updated: October 2026 | Free to use | No sign-up needed