Part-prepayment in home loan
The home loan part pre-payment facility allows you to pay off a substantial portion of the principal outstanding before its due date. This helps you save on your overall interest payment and leads to an EMI reduction, a tenor reduction, or both.
There is no limit on the maximum amount, however, the minimum amount per pre-pay transaction cannot be less than 3 EMIs.
Additional read: Factors to keep in mind when prepaying your home loan
Benefits of Home Loan Prepayment
The prepayment of home loan refers to when a borrower repays a sum over and above the EMI amount ahead of schedule. As this amount is not a part of your EMI schedule, it goes towards repaying the principal amount.
- The foremost benefit of home loan prepayment is that it helps you become debt-free sooner
- It is important to have the flexibility to prepay at your pace, since this helps you direct any additional income towards offsetting your debt
- The promptness in clearing a debt also contributes positively towards your credit score
How Prepayment Charges Are Calculated
As per RBI guidelines, individuals with a home loan linked to a floating interest rate do not have to pay any additional charges on prepayment or foreclosure. Thus, such borrowers can choose to prepay whenever they have surplus funds. Those with home loans linked to fixed interest rates are liable to pay nominal charges on prepayment. Typically, home loan prepayment charges are calculated as a small percentage of the prepayment amount.
