Prepayment & Foreclosure Simulator

As per RBI guidelines, banks and NBFCs cannot charge prepayment or foreclosure fees on floating-rate home loans to individual borrowers. However, fixed-rate home loans may attract prepayment charges of 2-4% depending on the lender. Always check your loan agreement for specific terms before making a prepayment.

Compare your home loan interest rate with the post-tax return you can earn on investments. If your loan rate is 8.5% and you can earn 12%+ from equity investments (post-tax), investing may be better. However, if your risk appetite is low, prepaying a loan at 8.5% is equivalent to earning a guaranteed 8.5% return - which is attractive. Consider your emergency fund, other goals, and risk tolerance.

Part-prepayment means paying a lump sum towards your loan principal while continuing regular EMIs - this reduces either your EMI or your remaining tenure. Foreclosure means paying off the entire outstanding loan in one go, closing the loan account completely. Foreclosure saves the most interest but requires a large lump sum.

When you make a prepayment, you can choose to either reduce your EMI (keeping tenure the same) or reduce your tenure (keeping EMI the same). Reducing the tenure saves more interest over the loan life. For example, a ₹5 lakh prepayment might reduce your EMI by ₹5,000, or it might reduce your tenure by 3-4 years - the latter saves lakhs more in interest.