If you have taken a home loan and want to foreclose it, you could make part-prepayments or full prepayments against your loan. This is an option you could exercise if you have the funds to repay your home loan faster. According to RBI guidelines, lenders cannot levy any loan foreclosure fee on floating rate loans. However, for fixed rated loans, this amount could vary between 0.5% and 3% of the outstanding loan amount. In this regard, a home loan prepayment calculator could help you know about the EMIs meant to be paid to repay your loan before tenure. This significantly helps pre-plan your home loan foreclosure effectively.
Rate of Interest (P.a)
Loan Tenure (Years)
You can use a home loan prepayment calculator to calculate your outstanding EMIs and savings from prepaying your loans in part or full before the loan tenure. To use this housing loan repayment calculator, you will have to provide the following details:
By using the house loan repayment calculator, you can determine the following aspects of a loan as mentioned below:
Computing your EMIs, and analysing your savings on prepaying a loan manually can become a cumbersome process. Thus, using a housing loan prepayment calculator online can be handy.
Here we will share information about smart ways to benefit from house loan prepayments. Please check the same below.
Paying a certain sum of money as a down payment against your loan will reduce your debt burden significantly. With a lower debt burden, your interest rate will be lower. Also, your overall prepayment amount will get reduced.
But how much should be my down payment percentage?
You can consider paying 20 – 30% of your loan amount as a down payment. However, this will depend on your financial situation.
Part home loan prepayments can be useful in reducing the principal amount and also the subsequent EMIs that you will have to pay. Lower EMIs will ease the debt burden and you can easily pay them on the time. Such an approach will help to clear out the loan well within the tenure.
Shorter tenure will result in higher EMIs repayments. But in return, you will be able to repay your loan within a shorter period. Short tenure will also mean significantly lower interest rates. Clearing loans in a shorter duration will also boost your credit score.
Whenever you apply for a loan it is important to look at the interest rates. This will ensure that your EMIs are affordable so that you can repay them on time.
If it is possible, try paying higher EMIs for a loan. This considerably reduces your overall debt burden.
For example, a borrower opts to increase his or her EMIs by Rs. 5,000 each month on a home loan of Rs. 20 lakhs. After the 11th year of repayment, he or she can save nearly Rs. 2.4 lakhs on the total payable interest. The tenure of loan payment will also get reduced by about 36 months.
If borrowers possess surplus funds individuals, they can make a full prepayment of their loan before the loan tenure expires. This is known as foreclosure of a home loan.
It is the month in the loan repayment period when you completely repay the full loan amount in advance. For example – If your loan tenure is for 6 years (72 months), and you decide to make a full prepayment by 4 years 6 (54) months, then your foreclosure month will be the 54th month.
Banking institutions normally charge 1% – 4% on the payable amount as foreclosure charges on fixed rate home loans. However, as per RBI guidelines, lenders are not supposed to charge any foreclosure fee on floating rate loans.
In 2019, the Reserve Bank of India (RBI) declared that HFCs would not be able to levy any prepayment penalties or foreclosure charges on home loan prepayments in these cases.
According to the guidelines of RBI, financial companies are liable to impose prepayment charges on an outstanding amount of loan only. In such a case, prepayment charges usually range between 2% – 3%.
Mentioned below are the scenarios when financial institutions can levy charges on house loan prepayments. Check the same below.
Along with this, the apex bank made another important declaration. It declared a circular that states that all non-banking finance companies must hold at least 60% of net assets deployed in the business of financing for houses. Firms not fulfilling this criterion must get the same done in a phased manner by 31 March 2024.
Prepaying a home loan can help you save some money and boost your CIBIL score. But you must take note of the charges incurred during prepayment. A home loan prepayment calculator will help you understand your savings for partial repayment of your loan. Accordingly, you can plan your loan settlement.
For instant home loans, you can apply through the Navi app. With Navi Home Loan, you get to enjoy a 100% paperless application process and low-interest rates starting at 7.39% p.a.
Ans: The minimum part payment amount is generally equal to the EMI amount that a home loan borrower has to pay. However, there may be additional riders according to the loan’s terms and conditions.
Ans: Yes, you can use the balance transfer facility to reduce the total payable amount.
Ans: Repaying the entire loan is known as home loan repayment. On the other hand, partly repaying the outstanding amount is known as prepayment.
Ans: Any borrower planning for a home loan is eligible to avail of this facility. However, you will have to check with your bank if the loan prepayment facility is on offer while applying for this loan.
Ans: Foreclosing a loan will have charges levied. If this penalty exceeds your interest saved on the loan, then it does not make sense to pre-close or foreclose any loan.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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