Home Loan Prepayment Calculator for India
Every bank calculator tells you the interest a prepayment saves. This one tells you that too, then asks the question they leave out: what the same money would have been worth invested instead, and the return at which that becomes the better answer.
Your loan, and the money you have
A prepayment does two things at once: it removes interest you would otherwise have paid, and it uses up money that could have been invested. Bank calculators show the first and stop. Both are real, both compound, and the answer turns on which is larger over the years you have left, so this calculator runs the two paths side by side to the same finish line.
How it works
- Enter the loan as it was sanctioned, and how many years of EMIs you have already paid.
- Enter the lump sum you are deciding about, and any amount you would keep paying on top of the EMI.
- The interest and months saved come first, then the same money invested instead, then the return at which the answer changes hands.
Before you start
- Timing: a home loan is front-loaded, so the same rupee saves far more in year three than in year twelve.
- Top-up: a standing amount alongside the EMI often beats waiting to accumulate a lump sum, because it starts working sooner.
- Return: use a figure you would actually hold through a bad decade, not the best years of the last one.
You'll get
- Interest saved, months saved, and the month the loan closes
- What each path leaves you holding at the original end date
- The return at which investing overtakes prepaying
- The smaller EMI you could take instead, and what it is worth
Interest saved
paid into the principal
Loan closes
instead of month , so earlier
Your EMI
Outstanding now
Interest without it
Interest with it
The same money, invested instead
Both paths are run to month , the month your loan would originally have ended, and both part with exactly the same money every month along the way. Where the loan closes early, the freed EMI goes into investments for the months that remain.
Prepay, then invest the freed EMI
Invest it, keep paying the EMI
What would change this
Each line moves one figure on its own and leaves everything else where you set it.
Or take it as a smaller EMI
What you still owe, year by year
Why interest saved is only half the answer
On the pre-filled loan, ₹5 lakh paid into the principal at the end of year three saves ₹13,08,027 of interest. It is a real number and it is not in dispute. The trouble is what it invites you to compare it with: ₹5 lakh spent against ₹13 lakh saved looks unanswerable, and it is the wrong comparison twice over.
First, the ₹13.08 lakh does not arrive in year three. It is spread across the following seventeen years, mostly as EMIs you no longer have to pay in years eighteen through twenty. Second, the ₹5 lakh had somewhere else to go. Both paths have to be run to the same finish line, with the same money leaving your hands each month, before either figure means anything.
The two paths
- Prepay, then invest the freed EMI. The loan closes in month 207, so from month 208 to 240 the EMI is yours again and goes into investments.
- Invest it, keep paying the EMI. The lump sum compounds from month 36 to month 240 while the loan runs its full term.
Both spend the same amount in every month, which is the only condition under which the two end figures can be compared at all.
The break-even is your loan rate
Prepaying is an investment that returns your interest rate. Every rupee of principal you clear is a rupee that stops being charged 8.25% a year, so the return is exactly the rate on the loan, and it is certain and tax-free in a way no market return is.
On the pre-filled figures the calculator puts the break-even at 8.57% rather than 8.25%, and the gap is worth a sentence because it looks like a discrepancy and is not. A loan rate is quoted as a nominal annual rate charged monthly, while an investment return is quoted as a CAGR. Compound 8.25% monthly for a year and you get 8.5691%. The two figures are the same rate said twice, in the two conventions each side of the comparison is normally quoted in, which is why this calculator reads the return you enter as a CAGR and says so on the field.
So the practical question is not whether the market beats 8.25%. It is whether it beats roughly 8.6%, after tax, reliably, across the years you have left on the loan. Below that, prepaying wins outright. Above it, investing wins on the arithmetic, and you are then choosing a probable gain over a certain one, which is a judgement the arithmetic cannot make for you.
Tenure or EMI, and why timing dominates both
When you prepay, the bank will ask whether you want the tenure shortened or the EMI reduced. The standard advice is to shorten the tenure, and it is right that shortening saves considerably more interest, because you carry the balance for fewer months. Interest saved is not the same thing as money kept, though, and the two options are more evenly matched than the advice suggests.
Both choices cost you exactly the same amount every month: on the pre-filled loan, either ₹54,532 to the bank until the loan closes early, or ₹49,966 to the bank and ₹4,566 into investments for the full term. Run those to month 240 and the second ends ahead whenever your return beats the loan rate, crossing at the same 8.57% the prepay-or-invest question crosses at. It is the same wager each time, a rupee into the loan against a rupee into the market, so one rate settles every fork in this decision.
The real argument for shortening the tenure is therefore not arithmetic but character. A shorter loan invests the difference for you, automatically, whether or not you remember to. A lower EMI hands you the money each month and trusts you to invest it rather than absorb it, and most households absorb it. Shorten the tenure unless you are certain you are the exception, and note that the certainty is about you, not about the market.
Underneath that choice sits a larger one. A home loan is front-loaded: in the early years almost the whole EMI is interest, which is why prepaying in year three removes so much more interest than the same amount in year twelve. If you are going to prepay at all, when matters more than which option you pick at the counter.
What this calculator leaves out, deliberately
- Tax, on both sides. A Section 24(b) interest deduction under the old regime makes prepaying worth slightly less, and tax on redemption makes a market return worth slightly less. Since the right adjustment depends on your regime, slab, and holding period, the figures here stay pre-tax and visible rather than carrying a buried assumption.
- Your emergency fund. Money in the principal is gone. It cannot be withdrawn when a job ends or a hospital calls, and a loan cleared early is no help at all in the month you need cash. Prepay from surplus, not from the buffer.
- Rate changes. The loan rate is held where you set it. On a floating rate loan a reset changes the interest saved, and it changes the break-even with it.
- Certainty. The comparison treats a guaranteed 8.25% and a hoped-for 12% as though they were the same kind of number. They are not, and the difference deserves a premium the arithmetic does not award.
Prepayment questions, answered
How much interest will I save by prepaying my home loan?
It depends on the size of the prepayment and, far more than most people expect, on how early it lands. On a ₹64 lakh loan at 8.25% over 20 years, ₹5 lakh paid into the principal at the end of year three saves ₹13,08,027 of interest and closes the loan 33 months early. The same ₹5 lakh paid in year fifteen saves a fraction of that, because by then most of the interest has already been charged.
Is it better to prepay a home loan or invest the money?
Prepaying earns you exactly your loan rate, guaranteed and tax-free. Investing earns whatever the market gives you, which is neither guaranteed nor tax-free. So the arithmetic question is whether you expect to beat the loan rate, and the honest answer is that a certain return deserves a premium over an uncertain one of the same size. On the pre-filled figures the two paths are worth the same at a 8.57% return, which is simply 8.25% compounded monthly and quoted as an annual rate.
Should I reduce the tenure or the EMI when I prepay?
Shortening the tenure saves far more interest, and that is the usual advice. It is not quite the whole story, because interest saved is not the same as money kept. Both options cost you the same amount every month, so they can be compared directly, and if you invest the monthly difference a reduced EMI ends ahead whenever your return beats the loan rate, crossing at the same 8.57% as the prepay-or-invest question. The catch is the word "if". A shorter tenure invests the difference for you automatically; a lower EMI relies on you doing it every month for years, which most households do not. Shorten the tenure unless you are sure you are the exception.
Can a bank charge me a penalty for prepaying my home loan?
For a floating-rate home loan to an individual for non-business purposes, RBI prohibits prepayment charges. The Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025 apply to loans sanctioned or renewed on or after 1 January 2026, regardless of the source of repayment funds and without a minimum lock-in period. Fixed-rate loans may carry charges under the lender’s approved policy; the 2026 start date does not exempt them. For a dual-rate loan, the exemption depends on whether it is on a floating rate when you prepay. Earlier loans remain subject to the rules applicable to them. Check your sanction letter, loan agreement, and Key Facts Statement for any disclosed charges.
When is the best time to prepay a home loan?
As early as you can. A home loan is front-loaded: in the first years almost all of the EMI is interest, so principal repaid early removes interest that would otherwise have been charged for the whole remaining term. The same rupee paid later removes far less. This is why prepaying in year three does so much more than prepaying the identical amount in year twelve.
Does prepaying reduce my tax deduction?
It can. If you claim the Section 24(b) deduction on interest for a self-occupied property under the old regime, up to ₹2 lakh a year, then paying less interest also means claiming less deduction, which lowers the effective saving from prepaying. Under the new regime, the default since FY 2023-24, that deduction is not available on a self-occupied home, so the consideration does not arise for most borrowers. The figures here are pre-tax, consistent with the rest of this site.
How is the break-even return worked out?
Both paths are run to the same finish line, the month your loan would originally have ended, and are held to identical spending in every month along the way. On the prepaying path the loan closes early, so the freed EMI goes into investments for the remaining months. On the investing path the lump sum compounds while the loan runs its full term. The break-even is the return at which the two end up holding the same amount, found by solving the comparison rather than by estimating it.
Is my data stored when I use this calculator?
No. All calculations run in your browser; nothing you enter is sent to or stored on our servers.
Where to go next
- Prepay the home loan or invest the money? The same comparison worked through in full, one scenario at a time.
- EMI Calculator: the schedule this page prepays into, month by month, including the year your principal overtakes your interest.
- Rent vs Buy Calculator: if the loan is not signed yet, the prior question is whether to take it at all.
- Affordability Calculator: what the EMI should have been, bounded by cash and by what a bank will lend.
Source for the rule on prepayment charges: Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, RBI/2025-26/64, dated 2 July 2025, applying to loans sanctioned or renewed on or after 1 January 2026.