Home Loan Interest Saving Tips: When the Reserve Bank of India (RBI) cuts the repo rate, a lot of borrowers wait for lenders to cut the interest rate of their loans. Such a rate cut from the lenders helps save borrowers a substantial amount on their long-term loans.
Loans such as home loans are linked to the repo rate, and a cut in it also leads to a rate cut in the loan.
But if that is not the case, a borrower has many ways to reduce the interest amount.
Prepayment, refinancing, increasing equated monthly instalment (EMI), down payment, and balance transfer are a few of them.
In this write-up, we will tell you about prepayment.
Also know if it is possible to save around Rs 32 lakh in interest on a Rs 62 lakh home loan.
Prepayment for home loan
Prepayment is a process where you can prepay your home loan in one go or in part payments.
It helps save a substantial amount on your loan. But lenders may have their own conditions for prepayment.
Lenders’ conditions for prepayment
Lenders may have a lock-in period of 1-3 years for prepayment.
If you want to foreclose your loan by making a large prepayment, they may put a penalty on you other than taking foreclosure charges.
They may also ask to make a minimum prepayment.
So, a borrower needs to check all these conditions to analyse if a prepayment will really help them save the interest amount.
After you make a prepayment, the lender gives you two options: either to reduce EMI or the tenure.
If you reduce your EMI, you will save the interest amount, but your loan tenure will remain the same.
If you keep your EMI the same, your interest and tenure both will be cut.
Calculations for story
Here we will show what the outcome will be if a borrower makes periodic payments on a Rs 62 lakh home loan taken at a 10 per cent interest rate for 25 years.
The borrower will make 3 prepayments of equal amounts.
The total prepayment will be 10 per cent of the loan amount. For a Rs 62 lakh loan, the total prepayment will be Rs 6.2 lakh of Rs 2,06,667 each instalment.
Home for EMI and interest
For such a loan, the estimated EMI will be Rs 56,339, the estimated interest will be Rs 1,07,01,834, and the estimated corpus will be Rs 1,69,01,834.
The first prepayment will be made after a 3-year lock-in period from the start of the loan, the second will be after 4 years, and the third will be after 5 years.
So, if the home loan started in May 2025, the 1st prepayment will be in May 2028, the 2nd will be in May 2029, and the 3rd will be in May 2030.
Look at the estimated results that you are likely to get after making these prepayments.
If you reduce your EMI
In that case, your EMI amount will be shortened by an estimated Rs 5,905, and the estimated interest saved will be Rs 8,61,571.
If you keep your EMI same
If you pick this option, the estimated amount saved will be Rs 31,35,124.
The estimated time saved will be 66 months.
(Disclaimer: This is not financial advice. Do your due diligence or consult an expert for financial planning.)
Anurag Dhole is a seasoned journalist and content writer with a passion for delivering timely, accurate, and engaging stories. With over 8 years of experience in digital media, she covers a wide range of topics—from breaking news and politics to business insights and cultural trends. Jane's writing style blends clarity with depth, aiming to inform and inspire readers in a fast-paced media landscape. When she’s not chasing stories, she’s likely reading investigative features or exploring local cafés for her next writing spot.
- ANURAG DHOLEhttps://indiatadkha.com/author/bitlancetechhubgmail-com/
- ANURAG DHOLEhttps://indiatadkha.com/author/bitlancetechhubgmail-com/
- ANURAG DHOLEhttps://indiatadkha.com/author/bitlancetechhubgmail-com/
- ANURAG DHOLEhttps://indiatadkha.com/author/bitlancetechhubgmail-com/
