Home Loan Prepayment Calculator

Home Loan Calculator with Prepayment

Home loan prepayment is an effective way by which borrowers can use any extra income they come across to reduce their home loan debt and close it before the originally planned tenure. Paying an amount even as little as one extra EMI per year would go a long way into helping you close your loan much faster. SMFG Grihashakti provides an online home loan partial prepayment calculator to help you understand the effect of making part prepayments on your home loan.

The partial prepayment option is extremely popular among individuals who have borrowed a home loan at a floating rate of interest for non-business purposes. As per the RBI rules, there are no extra charges for making part-prepayments towards one’s home loan in such a case. Thus, if you get any extra income such as bonus payments from work, dividends from shares/investments, unexpected extra income (for self employed and business owners) during festive seasons, etc; you can use a part of this income for making a part pre-payment on your home loan.

Home loan calculator with an EMI increase and/or part pre-payment

Increasing your monthly EMI payment and/or part pre-payment of outstanding loan amount will not only accelerate your journey to debt-free homeownership but also translate into substantial interest savings.

Let's say you have a principle outstanding of INR 10 Lakhs at 10% interest rate and 10-year residual tenure with a monthly EMI of approx. INR 13,200. Now, if you increase your EMI by just 10% to approx. INR 14,500, your tenure reduces to approx. 8.5 years and you save an interest of almost INR 1 Lakh.

Taking the same example, if you do a part pre-payment of INR 2 Lakhs keeping everything else unchanged, your tenure reduces to approx. 7 years and you save an interest of almost INR 2.6 Lakhs.

However, if you increase your EMI by 10% and do a part pre-payment of INR 2 Lakhs, your tenure reduces to approx. 6 years and you save an interest of almost INR 3 Lakhs.

How does the Home Loan Prepayment Calculator work?

SMFG Grihashakti offers a free housing loan prepayment calculator which can give you instant results. Existing home loan customers can use this automated tool to determine the amount of savings that they can make by opting to make a part-prepayment on their home loan.

The process is simple. Just fill in the below details:

• Original Loan amount
• Original Tenure
• Rate of interest
• Number of Installments/EMIs already paid
• Prepayment amount
• Revised EMI Amount

Now just click on ‘Calculate’ on the home loan part prepayment calculator and you can see the interest savings from going ahead with a prepayment against the home loan.

Please note that this calculator has the following limitations:

• Not applicable in case of any pre-EMIs.
• Does not take into account any penalty charges / bounce charges / late payment fees, etc.
• Does not take into account the effect of moratorium or loan restructuring facility, if availed.
• Does not help you calculate the effect of paying a higher EMI amount.
• Assumes that you will continue to pay the same EMI as per the original schedule after making the part pre-payment.
• Does not take into account any additional charges (like insurance) that may be applicable.

What is Home Loan Prepayment?

If you decide to make full or partial payment against your home loan which is in addition to your regular payment schedule , it can be referred to as a prepayment of home loan.

In case your income increases over the tenure of the loan, you can also speak with your lender to increase your monthly EMI.

In both cases, your loan gets repaid faster, and you can save on the overall interest payout. This is possible because prepaying against the housing loan reduces your interest component. The amount paid towards part pre-payment is deducted from the principal amount outstanding.

What is the Eligibility for a Housing Loan Prepayment?

You can get an estimate of savings by using the prepayment of the home loan calculator. But the question remains – is every home loan borrower eligible to benefit from this?

Again, the answer is ‘yes’.

The majority of lenders in India like SMFG Grihashakti offer prepayment facilities to their home loan customers.

Importance of Home Loan Prepayment

Prepaying a home loan can have several benefits, including:

1. Reduced Interest Burden: Prepayment lowers the outstanding principal, reducing the total interest payable over the loan tenure.

2. Debt-free sooner: Prepayment helps in closing the loan before the original tenure, saving on interest costs.

3. Improved Credit Score: Closing a loan successfully can improve your credit score, making future credit approvals easier.

4. Financial Freedom: Being debt-free sooner provides financial freedom and flexibility to pursue other goals.

5. Tax Benefits: While there are no specific tax benefits for prepayment, it reduces the interest component, indirectly affecting tax savings.

6. Peace of Mind: Eliminating a significant debt can provide peace of mind and reduce financial stress.

Does Home Loan Prepayment Attract Additional Charges?

One should check if their housing loan has a prepayment clause prior to signing the home loan agreement. Also, check if there are any additional fees or charges attached to making a prepayment against the Housing loan.

At SMFG Grihashakti, there are no foreclosure charges applicable for part-prepayments or prepayments made towards home loans taken at floating interest rates for non-business purposes.

Under What Special Circumstances Are the Prepayment Charges Levied?

Generally, the lending partners derive their list of fees and charges from the guidelines issued by the Reserve Bank of India.

Let’s take a look at these guidelines when your lender can levy a penalty fee on home loan prepayment:

Your lender may charge a prepayment penalty

• If you are a non-individual borrower.
• If your home loan is at a fixed rate of interest.
• If it is a dual-rate loan and the repayment is on a fixed interest rate.

Your lender may charge you a prepayment penalty

• If your home loan is at a fixed rate of interest.
• If you are taking out another loan from another HFC or bank to make the prepayment.

Of course, there are circumstances under which the prepayment on Housing loan penalty charge cannot be levied by lenders.

Your lender may not charge you a prepayment penalty

• If your home loan has been availed by an individual on a floating interest rate

Your lender may not charge you a prepayment penalty

• If the home loan has been availed of by an individual on a fixed interest rate.
• If the borrower is making the prepayment from his own funds.
• If it’s a dual-rate loan and currently the borrower is on a floating interest rate.

If you are a SMFG Grihashakti customer, check our Schedule of Fees and Charges to know the exact charges applicable on prepayment / foreclosure.

What Are the Things to Consider Before Making Home Loan Prepayment and/or increasing EMI?

Making a home loan prepayment and/or increasing your EMI is not a decision to be made in a hurry. You must take the following factors into consideration before you arrive at a decision.

Your Age: Single young borrowers must definitely utilise this option so that they can close their debts early before they have dependents to manage within their budgets.

Future Cash Requirements: Make sure that a prepayment against your housing loan does not make a dent in your savings, and you have sufficient money to manage any other expenses such as paying insurance premiums, children’s school fees, and so on.

Are There Reasons Why You Should Not Make a Prepayment and/or Increase Your EMI?

So, you used the home loan partial payment calculator and now have an estimate of your potential savings. You know that making this a part pre-payment and/or increasing your EMI will minimize your interest burden. However, there is a limit to how much this should be done. Using all your additional income or savings to make part prepayments or increasing your EMI, may not be advisible under all circumstances since you can use part of this money for other important things such as:

• Managing your monthly expenses.
• Emergency funds.
• Responsibilities towards family members.
• Insurance premiums.
• Retirement investment.

If you have any questions about home loan prepayments and/or increasing your EMI, simply call the customer service team on their toll free number 1800 102 1003 or email grihashakti@grihashakti.com to schedule an appointment.